Clarification of wording in will / property trust

NedS

I'm seeking some clarification on the wording of a will (written in 1993) for which I am named as an executor, mainly regarding a property trust (not sure if this is called a life interest trust / IPDI Trust?).
To clarify, these are mirrored wills of a married couple, both of whom are still living, where the other spouse and children are named as trustees. The family property is held tenants in common 50:50 between husband and wife.
The wording is as follows:

3(a) I give (free of all taxes) to my spouse (named here) my personal chattels as defined by Section 55 of the Administration of Estates Act 1925
3(b) My Executors shall hold all my beneficial share and interest in the freehold land and premises known as [address here] aforesaid or any other property which constitutes my principle residence at the date of my death (the Property) and in the rents and profits until sale and the proceeds of sale thereof (hereafter call "the Property Fund" which expression shall include and property investments and cash from time to time representing the same) upon Trust to retain or sell it and...

and goes on to list details of how the surviving spouse can reside rent free at the property until death etc and the capital value is left to the children in trust upon second death (I can give exact wording if relevant)
Couple of questions:
Firstly, what constitutes "personal chattels", and specifically where do cash and investments fall within this?
Section 55 of the Administration of Estates Act 1925 states:

[F6(x)“Personal chattels” means tangible movable property, other than any such property which—
    consists of money or securities for money, or
    was used at the death of the intestate solely or mainly for business purposes, or
    was held at the death of the intestate solely as an investment:]

So if "Personal chattels" does not include money or securities for money, or investments, where do these fall if not otherwise specified in the Will? By default to the next of kin (spouse)? I understand that cash held in joint accounts defaults to the surviving account holder so is not an issue, but what happens to cash / investments held in single names?
Which leads into my second and main question regarding the property trust. What happens to their 50% share of the property if the property has already been sold before death and is held in cash/non-property investments? Would the cash or investments from their share of the Property then fall to the surviving spouse as the Property Trust cannot be established upon death as there is no property, or would the Trust still be established from their 50% share of the property held at the time of death in cash/investments?
I guess it's not clear to me if "... and the proceeds of sale thereof" can apply to the proceeds of sale before death or only after death once the Trust exists.

As is common in such circumstances, the intent of leaving the property in trust is to protect the surviving spouses beneficial rights whilst protecting their share of the capital value of the property for the children against care costs etc that may be incurred by the surviving spouse.

Thanks for any advice.

Keep_pedalling

Chattels are basically stuff that you valve accumulated over the years, jewelry, watches, furniture, cars ect. Not cash equities, land or property.

If the couple still have the mental capacity to do so, they really should make new wills as a matter of urgency a lot of things have changed since 1993 including the transferable NRB and residential NRB. It is also poor practice to name a specific property in a will as you have hinted there is a very strong possibility that you may no longer own it at the time of death. 

poseidon1

Cash and investments will fall into the estate residue.

At some point further on  in the will there must be a clause  (which you have not shared) relating to the remaining estate assets which are not chattels ( passing to the spouse) or the property (passing to the property trust). Those 'residual' assets pass in favour of the 'residuary'beneficiaries.

If there is no property at date of death, it would appear the property trust fails based on  my reading of clause 3(b). However I suspect that was not the intended outcome of that clause.

Ordinarily with a Will this old, and in view of the  imprecise  drafting of clause 3(b),  I would reccomend replacing them with new wills with modern IPDI trust clauses. However if the couple to whom this thread refers are the same as those  in your earlier thread below, I can see that course of action might now present challenges.

https://forums.moneysavingexpert.com/discussion/6593275/paying-care-home-costs#latest

If it is the same couple, it would make sense for the holders of the LPAs to seek legal advice as to whether the couple have legal capacity to replace the present wills, and if so , how such wills might be viewed given their now deteriorated  circumstances and current care arrangements.

NedS

poseidon1 said:

Cash and investments will fall into the estate residue.

At some point further on  in the will there must be a clause  (which you have not shared) relating to the remaining estate assets which are not chattels ( passing to the spouse) or the property (passing to the property trust). Those 'residual' assets pass in favour of the 'residuary'beneficiaries.

Thank you, there is a subsequent clause referring to the residue of the estate which clarifies that point - thank you for explaining.

poseidon1 said:

If there is no property at date of death, it would appear the property trust fails based on  my reading of clause 3(b). However I suspect that was not the intended outcome of that clause.

So you are saying the references to proceeds of sale and cash highlighted below only apply if the property is sold after death:

3(b) My Executors shall hold all my beneficial share and interest in the freehold land and premises known as [address here] aforesaid or any other property which constitutes my principle residence at the date of my death (the Property) and in the rents and profits until sale and the proceeds of sale thereof (hereafter call "the Property Fund" which expression shall include and property investments and cash from time to time representing the same) upon Trust to retain or sell it and...

madbadrob

Out of interest who wrote this will foryour parents?  Ive seen many wills and the only ones I have seen mentionuing the 1925 act and section 55 are those written by will writing companies.  This is more a personal interest of mine rather than any issues with the will.  These companies for whatever reason love to write trusts that are not needed etc into wills.

From what you have shared there is nothing in the will to suggest what you as executors are to do with any liquid cash but id expect somewhere further in the will to mention my residual ...... this would cover any liquid cash.  Other than this I cannot offer any more to what others have stated. 

Rob

poseidon1

NedS said:

poseidon1 said:

Cash and investments will fall into the estate residue.

At some point further on  in the will there must be a clause  (which you have not shared) relating to the remaining estate assets which are not chattels ( passing to the spouse) or the property (passing to the property trust). Those 'residual' assets pass in favour of the 'residuary'beneficiaries.

Thank you, there is a subsequent clause referring to the residue of the estate which clarifies that point - thank you for explaining.

poseidon1 said:

If there is no property at date of death, it would appear the property trust fails based on  my reading of clause 3(b). However I suspect that was not the intended outcome of that clause.

So you are saying the references to proceeds of sale and cash highlighted below only apply if the property is sold after death:

3(b) My Executors shall hold all my beneficial share and interest in the freehold land and premises known as [address here] aforesaid or any other property which constitutes my principle residence at the date of my death (the Property) and in the rents and profits until sale and the proceeds of sale thereof (hereafter call "the Property Fund" which expression shall include and property investments and cash from time to time representing the same) upon Trust to retain or sell it and...

Yes that is my interpretation on strict reading of the clause.

 I don't believe that was necessarily the intention,  but the wills draftsman did not provide for any form of specific tracing of property sale proceeds of the family home if no home existed by the time of death (I have seen such a tracing provision in another will shared on this forum). Even then such tracing might be defeated if some or all of the monies had in any event been spent or otherwise disposed of prior to death.

As I say, further legal advice seems in order here to correct this perceived defect in the current wills.

NedS

poseidon1 said:

NedS said:

poseidon1 said:

Cash and investments will fall into the estate residue.

At some point further on  in the will there must be a clause  (which you have not shared) relating to the remaining estate assets which are not chattels ( passing to the spouse) or the property (passing to the property trust). Those 'residual' assets pass in favour of the 'residuary'beneficiaries.

Thank you, there is a subsequent clause referring to the residue of the estate which clarifies that point - thank you for explaining.

poseidon1 said:

If there is no property at date of death, it would appear the property trust fails based on  my reading of clause 3(b). However I suspect that was not the intended outcome of that clause.

So you are saying the references to proceeds of sale and cash highlighted below only apply if the property is sold after death:

3(b) My Executors shall hold all my beneficial share and interest in the freehold land and premises known as [address here] aforesaid or any other property which constitutes my principle residence at the date of my death (the Property) and in the rents and profits until sale and the proceeds of sale thereof (hereafter call "the Property Fund" which expression shall include and property investments and cash from time to time representing the same) upon Trust to retain or sell it and...

Yes that is my interpretation on strict reading of the clause.

 I don't believe that was necessarily the intention,  but the wills draftsman did not provide for any form of specific tracing of property sale proceeds of the family home if no home existed by the time of death (I have seen such a tracing provision in another will shared on this forum). Even then such tracing might be defeated if some or all of the monies had in any event been spent or otherwise disposed of prior to death.

As I say, further legal advice seems in order here to correct this perceived defect in the current wills.

@poseidon1 Thank you. As you say, that was the intention and they will be seeking further legal advice, just wanted to get as clear an understanding as possible before proceeding.

Presumably, if the property were to be sold before death, they could just gift their their share of the property proceeds of sale to the intended beneficiary negating the need for any trust upon death. I don't believe there are any issues with IHT and gifting as, even with a 50% share from sale of the property, the estate is likely to fall below the £325k threshold (joint marital assets below £650k) so won't need to apply for RNRB.

NedS

madbadrob said:

Out of interest who wrote this will foryour parents?  Ive seen many wills and the only ones I have seen mentionuing the 1925 act and section 55 are those written by will writing companies.  This is more a personal interest of mine rather than any issues with the will.  These companies for whatever reason love to write trusts that are not needed etc into wills.

From what you have shared there is nothing in the will to suggest what you as executors are to do with any liquid cash but id expect somewhere further in the will to mention my residual ...... this would cover any liquid cash.  Other than this I cannot offer any more to what others have stated. 

Rob

The will in question was written by a local firm of solicitors. I think in this case, given the family's wishes, a trust is/was appropriate but seems to lack a little in it's implementation.

Yes, upon further checking, there is a subsequent clause for the estate residue covering how cash should be distributed, so I guess any proceeds of sale not reinvested into property fall under that clause to the surviving spouse.

poseidon1

NedS said:

poseidon1 said:

NedS said:

poseidon1 said:

Cash and investments will fall into the estate residue.

At some point further on  in the will there must be a clause  (which you have not shared) relating to the remaining estate assets which are not chattels ( passing to the spouse) or the property (passing to the property trust). Those 'residual' assets pass in favour of the 'residuary'beneficiaries.

Thank you, there is a subsequent clause referring to the residue of the estate which clarifies that point - thank you for explaining.

poseidon1 said:

If there is no property at date of death, it would appear the property trust fails based on  my reading of clause 3(b). However I suspect that was not the intended outcome of that clause.

So you are saying the references to proceeds of sale and cash highlighted below only apply if the property is sold after death:

3(b) My Executors shall hold all my beneficial share and interest in the freehold land and premises known as [address here] aforesaid or any other property which constitutes my principle residence at the date of my death (the Property) and in the rents and profits until sale and the proceeds of sale thereof (hereafter call "the Property Fund" which expression shall include and property investments and cash from time to time representing the same) upon Trust to retain or sell it and...

Yes that is my interpretation on strict reading of the clause.

 I don't believe that was necessarily the intention,  but the wills draftsman did not provide for any form of specific tracing of property sale proceeds of the family home if no home existed by the time of death (I have seen such a tracing provision in another will shared on this forum). Even then such tracing might be defeated if some or all of the monies had in any event been spent or otherwise disposed of prior to death.

As I say, further legal advice seems in order here to correct this perceived defect in the current wills.

@poseidon1 Thank you. As you say, that was the intention and they will be seeking further legal advice, just wanted to get as clear an understanding as possible before proceeding.

Presumably, if the property were to be sold before death, they could just gift their their share of the property proceeds of sale to the indented beneficiary negating the need for any trust upon death. I don't believe there are any issues with IHT and gifting as, even with a 50% share from sale of the property, the estate is likely to fall below the £325k threshold (joint marital assets below £650k) so won't need to apply for RNRB.

Well yes, gifting their property proceeds predeath is theoretically an option assuming neither party no longer needs a roof over their heads and have the necessary significant sources of guaranteed income to otherwise support themselves without having to resort to those proceeds.

However that is not a circumstance I would normally associate with modest estates valued below the joint NRB. If care home fees subsequently comes into the picture, and neither party are (or will be) self funding, such  a substantial gift would certainly appear to risk falling foul of deprivation of capital regulations.

NedS

One party is already in LA funded residential care and their assets are disregarded indefinitely due to Section 117 aftercare provision. They are presumably free to gift their share from proceeds of sale without fear of DoC.

Any property sale would be for the other party to realise their beneficial share in the property to fund their own residential care costs. I agree they would certainly risk falling foul of deprivation of capital regulations should they make substantial gifts from their own assets and leave themselves unable to meet their individual costs.