To Trust or not.

keef123

HELP!

I have read many threads on here but none really cover my question so please excuse me if I have missed something.

Dad passed away around 21 months ago and his share of his and Mum's house went to my sister and I. So Mum owns 50%, My sister and I own 25% each. 

Various friends, including a retired Accountant have advised Mum to set up a Trust for the house.
I, being a born sceptic, have asked why? She isn't sure why the advise was given, she isn't looking to save inheritance tax or any thing like that. Local authority care isn't a consideration, but even if it was Mum's estate would be used to keep her as comfortable as possible.
Mum is asking both my sister and I for advise. Neither my sister and I really know. For reference Mum is 82, Sister and I both sides of 60.

Are there any advantages to setting up a Trust for the property (valued for Dad's probate at £450,000)?
Surely, as long as Mum's will is clear (it is) as to her wishes, the house is safe and nothing else needs to be set up. 
Am I being naïve? 

Keep_pedalling

You are right to be sceptical, there is absolutlely no good reason to put your mother’s share of the property in trust, it just complicates things and could lead to an unnecessary CGT liability.

When it comes to your father’s share of the home however then an immediate post death interest trust (IPDIT) would be a far better option than putting the property in you and your siblings name, as it is the most tax efficient option and provides greater long term security for r your mother.

Did his will contain a clause giving your mother the right to live there for life? Have you already changed ownership with the land registry?

RAS

If dad's will set up an IPDI trust then mum needs to register that with the HMRC.

Beyond that you might be advised to set up a restriction on the Land Registry. 

Check on this forum and the housing one for cases where trusts have caused considerable problems both to the donor(s) and beneficiaries. If mum wants to take advice, she needs to meet a STEP solicitor not an accountant? 

By the way, if mum and dad were married at the time he died, there will be no IHT to pay as long as her estate is valued at less than £1m.

keef123

Thanks for your comments.

I have checked with Mum and She and Dad were 'Tenants in Common', owning 50% each.
When Dad died my sister and I were left his share, so Mum has 50%, we have 25% each. 

They were married when he died and the estate was under £1m.
Nothing has been changed at the Land Registry.

Many thanks again, I'm out of my depth here but not wanting to line someone else's pockets!

RAS

All good news but your mum needs to share with you the exact wording of dad's will.

If he left his share to you and your sister and and his will allows mum to live in the house for the rest of her life/until she remarries, then dad's will created an Immediate Post Death Interest trust.

You do need to understand the rules, because there are a number of advantages to you and your sister. For example if you want to buy a house and tell your lawyer you own 25% of the house, you'll be charged a lot of extra SDLT. You won't be liable for Capital Gains Tax when the house is sold if it's an IPDI trust.

The rules on IPDI trusts have changed and they now need registering with HMRC, so again you need to know if dad's will creates one.

Keep_pedalling

RAS said:

All good news but your mum needs to share with you the exact wording of dad's will.

If he left his share to you and your sister and and his will allows mum to live in the house for the rest of her life/until she remarries, then dad's will created an Immediate Post Death Interest trust.

You do need to understand the rules, because there are a number of advantages to you and your sister. For example if you want to buy a house and tell your lawyer you own 25% of the house, you'll be charged a lot of extra SDLT. You won't be liable for Capital Gains Tax when the house is sold if it's an IPDI trust.

The rules on IPDI trusts have changed and they now need registering with HMRC, so again you need to know if dad's will creates one.

And if it doesn’t you can still create one through a deed of variation, but that must be done within two years of your father’s death, so you need to get visibility of his will ASAP.

As RAS has said there are a number of advantages for you in having such a trust in place and also for your mother, as it gives her more security in the event of you or your sibling dying before her, going bankrupt or divorcing.

RAS

@keef123 K_p makes some very good points about the advantages to your mum of an IPDI trust, and the time limit in doing a deed of variation if there isn't one. It might be worth mum coming here in her own right if she needs more information?

boingy

Before you get involved with any trust make sure you understand the costs involved and the fact that trusts are a whole lot easier to create than they are to terminate. My family's total costs for a trust is currently over £6K and I'd expect a few thousand more when it comes to the end game. Everyone involved regrets it but we've been told that terminating it early requires a court and yet more costs.

RAS

boingy said:

Before you get involved with any trust make sure you understand the costs involved and the fact that trusts are a whole lot easier to create than they are to terminate. My family's total costs for a trust is currently over £6K and I'd expect a few thousand more when it comes to the end game. Everyone involved regrets it but we've been told that terminating it early requires a court and yet more costs.

This is not the sort of trust K_p and I are suggesting to keef123. If it exists, the details of the IPDI Trust will already be included in a couple of sentences in their dad's will. There is currently no fee to register the trust with the HMRC. 

If they need a IPDI trust creating, it literally is a few lines, signed dated and witnessed properly like any other deed of variation. 

But your experience is why people here are very wary of any advice on IHT planning that mentions trusts of any other sort. 

keef123

Thank you all for your advice. 
Mum is leaving this to us to advise her. Not the best legal practice, I guess, but she has looked after us for 60+ years so now we help her. 
Whilst adept at most day to day IT things she wouldn't post on here but both her and my sister are aware of the thread and, I believe, have viewed it. 
I am spending the day with Mum on Monday so will get a copy of the will and quote the exact wording on here.
I believe the IPDI may well be in place, Dad was financially trained (Old style Insurance Agent) and was quite astute when dealing with money.

Thanks for al your help so far, I will post again when I have details from the will.

Quick aside, love the signature, RAS, I must have made a lot of things!!

Keep_pedalling

keef123 said:

Thank you all for your advice. 
Mum is leaving this to us to advise her. Not the best legal practice, I guess, but she has looked after us for 60+ years so now we help her. 
Whilst adept at most day to day IT things she wouldn't post on here but both her and my sister are aware of the thread and, I believe, have viewed it. 
I am spending the day with Mum on Monday so will get a copy of the will and quote the exact wording on here.
I believe the IPDI may well be in place, Dad was financially trained (Old style Insurance Agent) and was quite astute when dealing with money.

Thanks for al your help so far, I will post again when I have details from the will.

Quick aside, love the signature, RAS, I must have made a lot of things!!

When you do just redact any personal info.