Wondering about legal action for advice to my parents on putting their house into a trust

ChocolateTeapot2024

Hi everyone,

I have discussed this in other threads, but my parents were badly advised by their financial adviser and a lawyer to put their home - principle asset - into a lifetime trust. They signed over their shares in the family home to the Trust, and appointed 4 trustees. The trustees were myself and my sister, and themselves. They also set up an ISA in a second trust (same trustees) to invest to cover any tax liability in case they did not survive 7 years. The trusts were set up in 2015. My father died in September 2019. My mother died in 2023. The house and their savings at the time were below the tax threshold for inheritance tax, and when there was news that tax thresholds were being revised by the govt, they contacted the lawyer, who said he would keep an eye on the situation and any actions to be taken (this was around 2017) The lawyer was paid a retainer to hold their wills and the Trust documents. 

They were introduced to the lawyer by their financial adviser, who did not inform them that he was a Director of the law firm at the time.

The lawyer died a week after my father from a very aggressive cancer which he had been fighting for the past 2 years (my guess around the time he should have advised my parents about the tax threshholds changing).

When my father died, the financial adviser was no longer a director of the law firm.

The law firm refused to release documents as the lawyer's wife had intended to employ a locum to run the business. It was really difficult to get our parents legal papers, which were only released in 2024. The law firm received a retainer from my parents account until after my mother died. 

The law firn was later sold, with its client books, to a larger law firm in the area (it was around this time that the retainer direct debit was cancelled).

I know that:

1. the original advice to my parents was faulty: as they did not know they should have been paying market rent for the house, the house was never valuable enough to warrant it, they were steered towards it by their financial adviser who was also a director of the law firm
2. the lawyer did not inform my parents of changes in tax law
3. the financial advisor did not inform my parents that he was a director of the law firm

It has taken a considerable effort to unravel the mess and work out probate on my mothers estate. We are still waiting for a final figure from HMRC but it may be around £135,000. We are employing a lawyer for probate, which has already cost £30,000 in legal fees, so we don't want to spend more on legal fees particularly if we dont have a case.

We also do not know if it is too late to take legal action.

Please can anyone give us some idea of what we should do?

thank you for your help

 

Keep_pedalling

What sort of financial adviser are we talking about here? If they were a regulated IFA then you may be able to persue them, but if, as I suspect, they were just sharks preying on people’s fears of IHT and care costs, you probably won’t get anywhere. 

ChocolateTeapot2024

Keep_pedalling said:

What sort of financial adviser are we talking about here? If they were a regulated IFA then you may be able to persue them, but if, as I suspect, they were just sharks preying on people’s fears of IHT and care costs, you probably won’t get anywhere. 

Yes they were an IFA - the particular adviser seems to have left the firm, but the firm still exists

Keep_pedalling

In does not matter if an individual adviser has left a company the company are still liable for poor advice provided by on of their advisors 

Perhaps @dunstonh could comment on this. 

Marcon

ChocolateTeapot2024 said:

Hi everyone,

I have discussed this in other threads, but my parents were badly advised by their financial adviser and a lawyer to put their home - principle asset - into a lifetime trust. They signed over their shares in the family home to the Trust, and appointed 4 trustees. The trustees were myself and my sister, and themselves. They also set up an ISA in a second trust (same trustees) to invest to cover any tax liability in case they did not survive 7 years. The trusts were set up in 2015. My father died in September 2019. My mother died in 2023. The house and their savings at the time were below the tax threshold for inheritance tax, and when there was news that tax thresholds were being revised by the govt, they contacted the lawyer, who said he would keep an eye on the situation and any actions to be taken (this was around 2017) The lawyer was paid a retainer to hold their wills and the Trust documents. 

They were introduced to the lawyer by their financial adviser, who did not inform them that he was a Director of the law firm at the time.

The lawyer died a week after my father from a very aggressive cancer which he had been fighting for the past 2 years (my guess around the time he should have advised my parents about the tax threshholds changing).

When my father died, the financial adviser was no longer a director of the law firm.

The law firm refused to release documents as the lawyer's wife had intended to employ a locum to run the business. It was really difficult to get our parents legal papers, which were only released in 2024. The law firm received a retainer from my parents account until after my mother died. 

The law firn was later sold, with its client books, to a larger law firm in the area (it was around this time that the retainer direct debit was cancelled).

I know that:

1. the original advice to my parents was faulty: as they did not know they should have been paying market rent for the house, the house was never valuable enough to warrant it, they were steered towards it by their financial adviser who was also a director of the law firm
2. the lawyer did not inform my parents of changes in tax law
3. the financial advisor did not inform my parents that he was a director of the law firm

It has taken a considerable effort to unravel the mess and work out probate on my mothers estate. We are still waiting for a final figure from HMRC but it may be around £135,000. We are employing a lawyer for probate, which has already cost £30,000 in legal fees, so we don't want to spend more on legal fees particularly if we dont have a case.

We also do not know if it is too late to take legal action.

Please can anyone give us some idea of what we should do?

thank you for your help

 

It's not a good idea to keep starting new threads when background is likely to be important. You are more likely to  get more, and more helpful, replies if you keep all the relevant facts in the same thread, even if the actual questions/topics vary or change a bit as the thread progresses.

If you've already spent £30,000 in legal fees, it's entirely understandable that you don't want to spend more - or at least, no more than is necessary.

Unfortunately, it's impossible to give the sort of categoric replies you are hoping for in the absence of all the necessary background, which must include full details of the trust and the actual advice given. Much depends on when the advice was given; who gave it and (crucially) by whom the advising party is/was regulated; and when the problem became apparent or 'ought reasonably' to have been apparent. Those facts will determine whether you can use the (free) services of the Financial Ombudsman. 

I can't believe that this scenario is going to be a new one for the probate solicitor you are using, so it's probably worth a word with them about how best to proceed. I appreciate that's not the answer you are hoping for, but suggesting anything else would quite simply be folly. I'm truly sorry - losing both your parents in fairly quick succession, and then having to contend with this mess, is horrible for you.

ChocolateTeapot2024

Marcon said:

ChocolateTeapot2024 said:

Hi everyone,

I have discussed this in other threads, but my parents were badly advised by their financial adviser and a lawyer to put their home - principle asset - into a lifetime trust. They signed over their shares in the family home to the Trust, and appointed 4 trustees. The trustees were myself and my sister, and themselves. They also set up an ISA in a second trust (same trustees) to invest to cover any tax liability in case they did not survive 7 years. The trusts were set up in 2015. My father died in September 2019. My mother died in 2023. The house and their savings at the time were below the tax threshold for inheritance tax, and when there was news that tax thresholds were being revised by the govt, they contacted the lawyer, who said he would keep an eye on the situation and any actions to be taken (this was around 2017) The lawyer was paid a retainer to hold their wills and the Trust documents. 

They were introduced to the lawyer by their financial adviser, who did not inform them that he was a Director of the law firm at the time.

The lawyer died a week after my father from a very aggressive cancer which he had been fighting for the past 2 years (my guess around the time he should have advised my parents about the tax threshholds changing).

When my father died, the financial adviser was no longer a director of the law firm.

The law firm refused to release documents as the lawyer's wife had intended to employ a locum to run the business. It was really difficult to get our parents legal papers, which were only released in 2024. The law firm received a retainer from my parents account until after my mother died. 

The law firn was later sold, with its client books, to a larger law firm in the area (it was around this time that the retainer direct debit was cancelled).

I know that:

1. the original advice to my parents was faulty: as they did not know they should have been paying market rent for the house, the house was never valuable enough to warrant it, they were steered towards it by their financial adviser who was also a director of the law firm
2. the lawyer did not inform my parents of changes in tax law
3. the financial advisor did not inform my parents that he was a director of the law firm

It has taken a considerable effort to unravel the mess and work out probate on my mothers estate. We are still waiting for a final figure from HMRC but it may be around £135,000. We are employing a lawyer for probate, which has already cost £30,000 in legal fees, so we don't want to spend more on legal fees particularly if we dont have a case.

We also do not know if it is too late to take legal action.

Please can anyone give us some idea of what we should do?

thank you for your help

 

It's not a good idea to keep starting new threads when background is likely to be important. You are more likely to  get more, and more helpful, replies if you keep all the relevant facts in the same thread, even if the actual questions/topics vary or change a bit as the thread progresses.

If you've already spent £30,000 in legal fees, it's entirely understandable that you don't want to spend more - or at least, no more than is necessary.

Unfortunately, it's impossible to give the sort of categoric replies you are hoping for in the absence of all the necessary background, which must include full details of the trust and the actual advice given. Much depends on when the advice was given; who gave it and (crucially) by whom the advising party is/was regulated; and when the problem became apparent or 'ought reasonably' to have been apparent. Those facts will determine whether you can use the (free) services of the Financial Ombudsman. 

I can't believe that this scenario is going to be a new one for the probate solicitor you are using, so it's probably worth a word with them about how best to proceed. I appreciate that's not the answer you are hoping for, but suggesting anything else would quite simply be folly. I'm truly sorry - losing both your parents in fairly quick succession, and then having to contend with this mess, is horrible for you.

Thank you for your sympathy about my parents. I miss them every day. They were good people - not rich but comfortable, and kind people - supported charities and helped people along the way less fortunate...

To clarify - the other threads dealt with different issues - so its the same story but very different queries and I didn't realise in my first questions that the Trust was so key to everything. It is a mess, but I think even if people read these threads and it prompts them to unravel the unnecessary trusts before they get stuck like us, it will have done some good.

Thank you for your help - I totally appreciate your advice

dunstonh

Keep_pedalling said:

In does not matter if an individual adviser has left a company the company are still liable for poor advice provided by on of their advisors 

Perhaps @dunstonh could comment on this. 

Thanks for the tag.  I would not have seen it otherwise.

They also set up an ISA in a second trust (same trustees) to invest to cover any tax liability in case they did not survive 7 years.

ISAs cannot be placed in trust.   So, that bit needs checking.

We also do not know if it is too late to take legal action.

Normally, these companies operate under a limited company basis.  You can take legal action against the company if it still exists, but if it has dissolved, then there is no legal entity against which to take legal action.    Also, if the company is no longer but still exists but has little or no assets, then it can be futile to take legal action as no money in the company means no award even if the courts rule in your favour.  You end up with a hollow victory and a large legal bill.

Also, the estate would be taking the action, and the executor has to be sufficiently confident of a positive outcome.   That would require paid for professional legal opinion.

Yes they were an IFA - the particular adviser seems to have left the firm, but the firm still exists

The IFA firm or the legal firm?

In does not matter if an individual adviser has left a company the company are still liable for poor advice provided by on of their advisors 

The FCA does not cover the sort of arrangement that appears to have been put in place.   So, FCA rules would not apply on the property side.    So, no Financial Ombudsman access or FSCS access.    The IFA would not carry liability.  The legal company would.  

For the investments side, then the FCA rules would apply but they would be against the original advice company.  

Multi-company structures are commonplace for firms that operate in this area.  Each carrying its own liability and one can shut without impacting on the other.