Joint tenants and trusts

cheshireperson

Hi - so sorry for this long post- I'm really panicked about this.  All paperwork for IHT is nearly done , but on checking it, I've come across a real headache. My mum died in 2016 and the house was transferred into my Dad's sole name- (the title deeds show they were originally joint tenants). The solicitor's letter at the time says "as joint tenants, I have transferred the house into your sole ownership". My Dad  passed away in March this year. The problem is that I've just read my Mum's will and instead of just leaving the house to my Dad, it mentions him being allowed to live there and something about it being in trust to me and my brother. I have a vague memory that they did this so that the house couldn't all be used for care home fees. I know that no official trust agreement was set up nor were they tenants in common. Not sure whether I should now treat the house as a trust?! I'd be so grateful if someone could help. Thank you . 

RAS

This sounds very much like an Immediate Post Death Interest trust. This is relevant if your parents were tenants in common, in which case the solicitor's letter makes little sense. Was this the same the firm who wrote the will? If so, they should have ensured that the tenancy was severed.

At the time the will was written and when your mum died, IPDI trusts did not need to be registered. More recently, old IPDI trusts should have been registered with HMRC. But the trust was terminated when your father died, so it's of limited relevance now, assuming that dad's will leaves more than 50% of the property value to be shared between your self and your brother?

Keep_pedalling

If you are 100% sure the tenancy was never severed and at the time of her death they were still joint tenants then that clause would fail and the trust would never have existed.

cheshireperson

Thank you for that ! I’ve ordered a copy of the land register documents on the date of my Mum’s death as proof . The solicitor’s letter to my Dad also states “as joint tenants “ . I wonder if I should include a letter in with the IHT forms explaining , with the proof ? 

madbadrob

cheshireperson said:

Thank you for that ! I’ve ordered a copy of the land register documents on the date of my Mum’s death as proof . The solicitor’s letter to my Dad also states “as joint tenants “ . I wonder if I should include a letter in with the IHT forms explaining , with the proof ? 

As joint tenants the trust that would have been formed as per your mums will the trust was not able to be made anyway as your father technically doesnt have a share in the property.  On her death the house automatically became your fathers and that would explain why the solicitor just changed the ownership on the deeds.  The trust could only be made if they were Tenants in Common.

As for the letter to HMRC I dont see what that would offer you all in relation to any tax implications although (and i may be corrected here) would mean that there is likely to be the spousal tax relief that can be applied to the estate for purposes of IHT

Rob

Keep_pedalling

What is the total value of your father’s estate including the house? Did you have to apply for probate and do an IHT return for your mother’s estate? 

cheshireperson

Hi Keep Pedalling  . There was no IHT applied for for my Mum as it all went to my Dad . Estate is 800k - I just hope I can still claim transferred NRB and RNRB with this “hiccup” . 

poppystar

cheshireperson said:

Hi Keep Pedalling  . There was no IHT applied for for my Mum as it all went to my Dad . Estate is 800k - I just hope I can still claim transferred NRB and RNRB with this “hiccup” . 

I’m not sure it makes any difference. The whole value of the property would be part of your father’s estate whatever. You can claim the RNRB from both parents as with the NRB (assuming your mother left nothing to anyone but your father) so you should have a £1m in allowances. 

Keep_pedalling

cheshireperson said:

Hi Keep Pedalling  . There was no IHT applied for for my Mum as it all went to my Dad . Estate is 800k - I just hope I can still claim transferred NRB and RNRB with this “hiccup” . 

Whether her share of the house passed into the trust or not, it would still have been covered by spousal exemption. With these sorts of trust although legal ownership sits with the trust, beneficial ownership is held with the surviving spouse, so none of your mother’s NRB or TNRB will have been used and the whole house still forms part of your father’s estate. The tax effect is neutral, and the only difference is that a trust needs to be registered with HMRC and needs an additional IHT form to be filled in.

As probate was not required for your mother’s estate there will be no public record of her will, so if the house is now solely in your father’s name I would simply administer the estate on the basis that no trust exists. If your mother’s estate was incorrectly administered there is no point in trying to retrospectively correct that, as it will make no difference to the tax situation it will just prolong things and create costs.  

cheshireperson

Keep_pedalling said:

cheshireperson said:

Hi Keep Pedalling  . There was no IHT applied for for my Mum as it all went to my Dad . Estate is 800k - I just hope I can still claim transferred NRB and RNRB with this “hiccup” . 

Whether her share of the house passed into the trust or not, it would still have been covered by spousal exemption. With these sorts of trust although legal ownership sits with the trust, beneficial ownership is held with the surviving spouse, so none of your mother’s NRB or TNRB will have been used and the whole house still forms part of your father’s estate. The tax effect is neutral, and the only difference is that a trust needs to be registered with HMRC and needs an additional IHT form to be filled in.

As probate was not required for your mother’s estate there will be no public record of her will, so if the house is now solely in your father’s name I would simply administer the estate on the basis that no trust exists. If your mother’s estate was incorrectly administered there is no point in trying to retrospectively correct that, as it will make no difference to the tax situation it will just prolong things and create costs.  

Thank you. That makes sense although there was probate done on it so they will have a copy of the will and also you have to include a copy of each will in the IHT submission . My fear is they will read the will and then will query it as it’s not been followed !

Keep_pedalling

cheshireperson said:

Keep_pedalling said:

cheshireperson said:

Hi Keep Pedalling  . There was no IHT applied for for my Mum as it all went to my Dad . Estate is 800k - I just hope I can still claim transferred NRB and RNRB with this “hiccup” . 

Whether her share of the house passed into the trust or not, it would still have been covered by spousal exemption. With these sorts of trust although legal ownership sits with the trust, beneficial ownership is held with the surviving spouse, so none of your mother’s NRB or TNRB will have been used and the whole house still forms part of your father’s estate. The tax effect is neutral, and the only difference is that a trust needs to be registered with HMRC and needs an additional IHT form to be filled in.

As probate was not required for your mother’s estate there will be no public record of her will, so if the house is now solely in your father’s name I would simply administer the estate on the basis that no trust exists. If your mother’s estate was incorrectly administered there is no point in trying to retrospectively correct that, as it will make no difference to the tax situation it will just prolong things and create costs.  

Thank you. That makes sense although there was probate done on it so they will have a copy of the will and also you have to include a copy of each will in the IHT submission . My fear is they will read the will and then will query it as it’s not been followed !

Back in 2016 any estate requiring probate would also have had to do a short form IHT return would also have had to be completed using IHT 205, however it is highly unlikely you will be challenged as it does not effect IHT and if you are then you simply explain that that bequest failed as the tenancy had never been severed. 

You will more likely have problems if you declare a trust that was never registered with HMRC.