Discretionary Trust & Probate

poseidon1

Thinking about the joint tenancy situation, if the severance had failed, the intial outcome on your mother 's first death is your father would have inherited her share of the house absolutely  by operation of law.

That would have meant little or nothing to go into the Trust on his behalf at that point, and he would have had sole ownership of the house when he died 30 days later. This should certainly have preserved all or most of your mother's nil rate band to transfer to him on his death, although the residence nil rate band still appears problematical, because of the ultimate gifting of his entire estate into the discretionary Trust of his will.

On balance, and because of the preservation of your mother's NRB transferable to your father, my preference would be for the severing of the joint tenancy to have failed with little or nothing passing into to your mother's trust on her 1st death. This would give rise to a more positive situation of just  1 discretionary trust  owning the entirety  of the house ( on your fathers death) , rather than the more complex position of two trusts holding half shares of the home.  I would press the solicitors on their insistence the severing was effective in law, it would be preferable for the opposite to be the case.

Keep_pedalling mentioned whether deeds of variation of the wills could make the whole sorry mess go away.

The problem with that approach for both trusts is ascertaining the extent of the beneficiary class who would have legal capacity to give up their discretionary rights under  principles established by the Saunders v Vautier case.

Adults over 18, no problem. Children under 18 would require the intervention of the courts on their behalf and since the beneficial class includes 'issue' this may extend to 'unborn' beneficiaries who would similarly require Chancery  court intervention to sign off rights on their behalf. Its not impossible, but there could be considerable expense involved including getting a barrister to settle the necessary pleadings. One way or another costs will arise to untangled this mess, so looking to  varying the wills to stifle the trusts must be worth a discussion, especially if it preserves both sets of  parents nil rate bands completely to give the joint  estates IHT  protection up to £1 million.

Hopefully, this gives you a little insight to have a more informed discussion with the solicitor to navigate a realistic course of action, but definitely  push for a meeting to get a handle on their thoughts and ideas as to how to move forward.

gonefishing

Thank you for your insights; much appreciated.  Given the complexities and potentially disastrous outcomes, I am surprised there is so little regulation and consumer protection.  Given our parents age and their capacity for understanding the wider implications of what they were doing, it would seem wreckless that the Estate Planner would take their instructions without a full capacity assessment.  Thanks again.

poseidon1

gonefishing said:

Thank you for your insights; much appreciated.  Given the complexities and potentially disastrous outcomes, I am surprised there is so little regulation and consumer protection.  Given our parents age and their capacity for understanding the wider implications of what they were doing, it would seem wreckless that the Estate Planner would take their instructions without a full capacity assessment.  Thanks again.

I believe this goes well beyond recklessness. My view is this entire fiasco perpetrated by the so called estate planning firm was a cynical attempt to soak your parents' estate for the 1% fees embedded within the unnecessary structures. Frankly I would see such firms shut down completely. 

It is an area long overdue for stringent regulation.

Keep_pedalling

poseidon1 said:

gonefishing said:

Thank you for your insights; much appreciated.  Given the complexities and potentially disastrous outcomes, I am surprised there is so little regulation and consumer protection.  Given our parents age and their capacity for understanding the wider implications of what they were doing, it would seem wreckless that the Estate Planner would take their instructions without a full capacity assessment.  Thanks again.

I believe this goes well beyond recklessness. My view is this entire fiasco perpetrated by the so called estate planning firm was a cynical attempt to soak your parents' estate for the 1% fees embedded within the unnecessary structures. Frankly I would see such firms shut down completely. 

It is an area long overdue for stringent regulation.

They also seemed to be extracting the maximum upfront fees for making such complex wills with worse than useless trusts and new complex LPAs where perfectly suitable LPAs were already in place. I dread to think what these sharks charged for all this. 

madbadrob

I cant answer the OPs question and others with more knoweldge are helping but from my experience in wills etc this looks very much like a will drafted by a will writer rather than a solicitor.  This could be why the solicitor now is dragging his feet


Rob

gonefishing

Update....

We have had a meeting with our solicitors, who concur that this is a discretionary trust.

They are absolutely certain we can use nil rate bands. They have advised that we can sign a Deeds of Appointment to end the trusts and at the same time complete IHT400.  Then as direct descendants we will be able to use rnrb and no tax will be due.  Once HMRC have issued a code, they will apply for probate.  All sounds quite simple??

The firm of solicitors we are using is quite large and well known in our area, with several solicitors working in a specialist Trust department, so one would hope they know what they are doing?  They blame pressure of work on their slow response, for which they have apologised.

Had they not taken so long to come up with their assessment of our position and advice, we would never have thought to question anything.

I may not be using the absolute correct terminology, but I think this is the jist of it.

Our inclination is to let them continue to deal with the matter, so we have an appointment to sign documents in a couple of weeks.  However, based on the comments received to my original question, I still feel slightly uneasy.  Are there questions we should be asking? Apart from what it's going to cost us 🤣

Many Thanks

poseidon1

gonefishing said:

Update....

We have had a meeting with our solicitors, who concur that this is a discretionary trust.

They are absolutely certain we can use nil rate bands. They have advised that we can sign a Deeds of Appointment to end the trusts and at the same time complete IHT400.  Then as direct descendants we will be able to use rnrb and no tax will be due.  Once HMRC have issued a code, they will apply for probate.  All sounds quite simple??

The firm of solicitors we are using is quite large and well known in our area, with several solicitors working in a specialist Trust department, so one would hope they know what they are doing?  They blame pressure of work on their slow response, for which they have apologised.

Had they not taken so long to come up with their assessment of our position and advice, we would never have thought to question anything.

I may not be using the absolute correct terminology, but I think this is the jist of it.

Our inclination is to let them continue to deal with the matter, so we have an appointment to sign documents in a coupleYh of weeks.  However, based on the comments received to my original question, I still feel slightly uneasy.  Are there questions we should be asking? Apart from what it's going to cost us 🤣

Many Thanks

The general position is that bequests of the family home into discretionary trusts disallow the residence nil rate band - see below

https://techzone.aberdeenadviser.com/public/iht-est-plan/residence-nil-rate-band-guide

Therefore prior to signing off the Deed of Appointment which the firm purports will resurrect the RNRB I would require written advice quoting chapter and verse to that effect.

If you received this advice in writing subsequent to the meeting all well and good. However if you are expected to sign off on various matters on the back of an undocumented meeting I would be less than happy.

Also worth asking why forms IHT 100 are not required for either trusts ( if these were not mentioned at the meeting).

Bearing in mind what your family has already had to contend with, its understandable you would have some residual misgivings, especially on such a impenetrable complex matter.