Probate: Unmarried couple: IHT, RNRB, Trusts & Land Registry

stanleyMI6

Hello, first time post to this forum and apologies for the length. I have searched and read through previous posts and ‘think’ I understand the issues but would like to check please.

Background

My father died in March this year. He lived with his long-term partner (un-married/no civil partnership) in their house which is co-owned 50%/50% as Tenants in Common.

Their house is being valued professionally but a good estimate is that it could be valued at £650,000 perhaps a little more. My father also has other assets (ISA, share of joint bank accounts, etc) of about £100,000. So, his total estate is in the region of £425k.

His partner and I are both executors of his will and she has asked me to help with probate and other similar matters.

His will is simple. It leaves his share of the property (approx. £325k) equally to myself and my brother (his sons) and all other assets (e.g ISA, residual estate – approx. £100k) to his partner. His will also has a provision for his partner to live in the property (“Right of Residence”) until her death (or other stipulated events) and I believe this is written in such a way as to create a IPDI trust. The precise wording is at the end of this post below.

Questions

1.      Inheritance Tax

a.      As they were unmarried, there are no transferable IHT allowances. Correct?
b.      My father will enjoy the basic £325k NRB – Correct?
c.      As my father’s share of the property is not being left directly to his sons, but is being transferred into a IPDI trust with his partner as the beneficiary of a life interest, the additional RNRB of £175k is not applicable. Correct?
d.      If C. is correct, then IHT will apply to approx. £100k of his estate above the £325k NRB (£425k less £325k NRB) and is payable within 6 months. Correct?
e.      Any other IHT matters I should be aware of?

2.      Trusts
a.      Am I right to describe the ‘Right of Residence’ clause in his will as creating a IPDI trust? Is this the correct technical term?
b.      If a trust is created, am I right in thinking this will need to be registered with HMRC within 2 years of his death?
c.      Are there any later tax implications for the trust (e.g. CGT) when the property is eventually sold (likely some way off)?
d.      Any other trust matters I should be aware of?

3.      Land Registry
a.      Should an entry (Form A restriction??) be added to the Land Registry entry along the lines of "Trustees of the late [X]" identified as one of the legal owners.

Anything else I should be aware of in this situation?

My apologies for the long post. I would really appreciate your collective advice.

Thanks

Will Extract 

5. RIGHT OF RESIDENCE IN THE HOUSE

(a) In this clause "my Trustees" means my Executors or the Trustees for the time being of this clause. My Trustees have all powers given to Executors by my Will

(b) The property shall not be sold without the resident's consent and the resident has the right to reside at the property until the earliest of the following events (hereinafter "an event"):

(i) the resident dies;

(ii) the resident ceases to reside permanently at the property;

(iii) the resident remarries or co-habits with another person;

(iv) the resident ceases to comply with any of the following conditions:

(a) the resident must pay all outgoings;

(b) the resident must keep the dwelling in good repair; and

(c) the resident must keep the dwelling insured to its full reinstatement value, with an insurance company approved by my Trustees, at the resident's expense.

(c) The decision of my Trustees as to whether an event has occurred, or a condition has been fulfilled, is binding.

(d) My Trustees are not obliged to ensure that the resident's obligations set out in this clause have been complied with.

Subject to the above:

My Trustees shall hold the property for my said sons XXX and YYY in equal shares

Provided that:

If the resident shall at any time prior to the happening of an event request in writing my Trustees to join in selling the property, or any other property purchased pursuant to this provision, my Trustees shall do so and at any time thereafter and at the like request of the resident shall apply all or any part, according to the request of the resident, of the net proceeds of sale in or towards the purchase of another freehold or leasehold property or flat or in an interest or share therein selected by the resident for use as her residence such acquired asset, interest or share to be held upon the Trusts for the benefit of the resident corresponding in all respects with the Trusts hereinbefore declared;

And if pursuant to this provision after any sale and purchase there is any surplus, then my Trustees shall hold all my share and interest in the said surplus for my said sons XXX and YYY and if more than one in equal shares

Keep_pedalling

A, b & c are correct so IHT is due on his estate. The only way round this is for her to make a deed of variation avoid the trust so that you inherit his share of the house outright. You could continue to let her remain but she will no longer have the security the trust in place and your share would be subject to CGT when the house is eventually sold. If either you or your sibling does not already own their own home then this has SDLT implications for you.

If you all have a good trusting relationship then this might be an option. 

poseidon1

Keep_pedalling said:

A, b & c are correct so IHT is due on his estate. The only way round this is for her to make a deed of variation avoid the trust so that you inherit his share of the house outright. You could continue to let her remain but she will no longer have the security the trust in place and your share would be subject to CGT when the house is eventually sold. If either you or your sibling does not already own their own home then this has SDLT implications for you.

If you all have a good trusting relationship then this might be an option. 

Nothing to add to Keep_pedalling's post other than to highly commend you on your comprehensive grasp of all aspects of your father's Will ( very rare to see this level of comprehension from posters in your position).

Land_Registry

Can only comment on part 3
3.      Land Registry
a.      Should an entry (Form A restriction??) be added to the Land Registry entry along the lines of "Trustees of the late [X]" identified as one of the legal owners.

Check the register first as you refer to them being TIC and 50/50 split so they may have already applied to register a form A restriction to protect the TIC/share/trust position - Search for land and property information - GOV.UK
The will/trust/50/50 share relates to their beneficial, not legal, ownerships
Probate is not required for the property as the legal ownership has passed to the surviving owner to deal with. I would recommend seeking legal/wider advice as to what's best for both of you and whether she transfers the whole legal ownership to herself and you, simply updates the register re the death; does nothing re the registered title or something else - we can't advise you on what's best or provide legal advice 
Once you have decided on what to do re the property then our online assisted guidance will guide you through the forms and more needed as appropriate - HMLR Guide: Start - External  · HM Land Registry

stanleyMI6

Thanks for the responses so far.

@Keep_pedalling Thanks for confirmation of my IHT understanding. I will certainly discuss the option you mention.

@poseidon1 Thanks. I am not sure how many hours I searched this forum and the general internet for information in the name of research! I have to say, this forum was by far the best resource.

@Land_Registry Thanks. There is currently a standard Form A restriction on the LR entry which was included at the time of their joint purchase. Therefore, should we record the death of my father by way of another restriction (e.g. Form Q)? In my late mothers case a few years ago (also TIC) the following was added to the LR entry after her death:

No disposition by the proprietors of the registered estate is to be registered unless one or more of them makes a statutory declaration or statement of truth, or their conveyancer gives a certificate, that the disposition is in accordance with the Will of the late XXXX or some variation thereof referred to inthe declaration, statement or certificate.

Land_Registry

stanleyMI6 said:

Thanks for the responses so far.

.................

@Land_Registry Thanks. There is currently a standard Form A restriction on the LR entry which was included at the time of their joint purchase. Therefore, should we record the death of my father by way of another restriction (e.g. Form Q)? In my late mothers case a few years ago (also TIC) the following was added to the LR entry after her death:

No disposition by the proprietors of the registered estate is to be registered unless one or more of them makes a statutory declaration or statement of truth, or their conveyancer gives a certificate, that the disposition is in accordance with the Will of the late XXXX or some variation thereof referred to in

the declaration, statement or certificate.

A death isn't recorded by means of a restriction. Form DJP plus copy death certificate updates the register re an owner's death.
Restrictions, notably forms A and Q, protect beneficial interests/trusts. We can't advise you on what to do as explained but can advise you on how to apply to update the register once you have considered the situation and options and then decided what to do. See PG 24 for guidance - Practice guide 24: private trusts of land - GOV.UK
But please do seek legal advice to understand the legal and beneficial ownerships as well as the wills/trust created and why for example a form Q restriction was applied for in one scenario and whether another might be warranted now naming your late Father's will

stanleyMI6

@Land_Registry Thanks. I will take advice as you suggest.