Property Protection Trust & beneficiary estrangement

blagoslovljena

My father passed away last year and we were estranged at the time. (No judgement please, I’m currently having NHS treatment for the complex PTSD caused by my parents and sibling.)

I had fully expected that he and my mother would disinherit me, which I am fine with as we didn’t/don’t have a relationship, but it has occurred to me that due to his death occurring after a short illness and their expectation that we would reconcile at some point, that this might not be the case.

When my parents bought their new build house (currently worth around £200k) a decade ago, they had a solicitor draw up a property protection trust and told my sibling and me that on the death of one of them, their 50% share of the property would be placed in trust for us until the death of the remaining spouse. My sibling and I were to be the two beneficiaries, but I am not sure who the trustees are.

My questions are as follows:

- is it possible that my sibling and I are trustees as well as beneficiaries?

- is it feasible for my mother to somehow change or revoke the trust following the death of my father?

- if my sibling, whom I am also estranged from, is also a trustee, could they prevent me from accessing my portion of my dad’s share of the property upon my mother’s death?

As I said, if I receive no inheritance that’s a price I’m willing to pay for my peace and mental health, however if I am entitled to anything from the trust, I would like my children (some of whom are disabled) to have the benefit of it.

Thanks for your help.

RAS

This very much depends on what sort of trust your father actually included in his will? And whether he's written a new one since you were estranged?

Property Protection Trust is a term used by will writers and lawyers to sell a product, but may refer to different things.

O2ften it is used instead of "Immediate Post Death Interest trust". These are integral to a will, which also includes the terms which govern the trust, and whether any assets other than the house are included.

Key to the IPDI trust is that the property is held as tenants in common, with each spouse owning a portion (often 50:50) of the property rather than both owning the whole as in a joint tenancy. They then leave a life interest to the survivor allowing them to live in the property until death or sale, and putting their portion into trust for the remaindermen, usually children or grandchildren.

The survivor would add the trustees to the restriction on the Land Registry, so they can't sell without consent, but may be entitled to any interest on capital if they downsize or go into care.

When the second spouse dies, the remaindermen inherit the first spouse's part free from CGT etc. It also ensures that remarriage or care costs don't prevent the remaindermen's inheritance.

There's nothing however to stop the surviving spouse changing their will.

The starting point may be to check the Land Registry (£7) for any restriction on the deeds?

Keep_pedalling

This sounds like an immediate post death interest trust not a dodgy PPT. If that is the case your mother will now be the beneficial owner of the whole house, but legal ownership of his share will now be legally owned by the trust. This means it forms part of her estate for IHT purposes but does not form part of her heritable estate. If you and your sibling inherit it after her death then you are the remaindermen, and nothing can be legally to change that. 

If your father’s estate has to go through probate then you will be able to obtain a copy of the will from the probate office once a grant of probate has been issued.

blagoslovljena

RAS said:

This very much depends on what sort of trust your father actually included in his will? And whether he's written a new one since you were estranged?

Property Protection Trust is a term used by will writers and lawyers to sell a product, but may refer to different things.

O2ften it is used instead of "Immediate Post Death Interest trust". These are integral to a will, which also includes the terms which govern the trust, and whether any assets other than the house are included.

Key to the IPDI trust is that the property is held as tenants in common, with each spouse owning a portion (often 50:50) of the property rather than both owning the whole as in a joint tenancy. They then leave a life interest to the survivor allowing them to live in the property until death or sale, and putting their portion into trust for the remaindermen, usually children or grandchildren.

The survivor would add the trustees to the restriction on the Land Registry, so they can't sell without consent, but may be entitled to any interest on capital if they downsize or go into care.

When the second spouse dies, the remaindermen inherit the first spouse's part free from CGT etc. It also ensures that remarriage or care costs don't prevent the remaindermen's inheritance.

There's nothing however to stop the surviving spouse changing their will.

The starting point may be to check the Land Registry (£7) for any restriction on the deeds?

Thank you.

It does sound like it’s an IDPI from what you describe, and I’m pretty sure my parents were listed as tenants in common and set up the trust with a solicitor when they bought their house, in order to reduce a local council’s ability to force the sale of the property to fund care costs for a surviving spouse, thus depriving my sibling and me of any inheritance. 

I don’t know what they were told at the time about the issues regarding the trust being seen as potentially deliberate deprivation of assets for social care purposes, but obviously in the case of my father he died before that was ever an issue.

My father’s short illness that led to his death occurred within weeks of the start of the estrangement so he would not have had time to change his will in the time available. Plus, he was actively working to verbally bully me back into line again and was assuming he’d succeed. I don’t think he thought I had the bottle to defy him and estrange. He’d always been able to force my compliance and submission that way in the past. 

If I were to check the Land Registry, would my mother (still living in the property) be notified that I had done so?

blagoslovljena

Keep_pedalling said:

This sounds like an immediate post death interest trust not a dodgy PPT. If that is the case your mother will now be the beneficial owner of the whole house, but legal ownership of his share will now be legally owned by the trust. This means it forms part of her estate for IHT purposes but does not form part of her heritable estate. If you and your sibling inherit it after her death then you are the remaindermen, and nothing can be legally to change that. 

If your father’s estate has to go through probate then you will be able to obtain a copy of the will from the probate office once a grant of probate has been issued.

Thank you.

As my father’s estate was under the IHT threshold and everything in the will (outside of the trust mentioned) was due to go straight to my mother, probate wasn’t needed.

If my mother changed her will to exclude me from her share of the house, would I still then be entitled to half of my father’s share that is in trust for my sibling and me, if this is indeed an IDPI trust?

And who are usually the trustees for this sort of trust? Would it be the solicitor that set it up in the first place? Would my sibling and I have been named as trustees as well as beneficiaries? At the time of the will/house purchase I was still on good terms with my sibling, and am named as an executor of my mum’s estate alongside my sibling. But as things stand I want to engage with my sibling as little as possible upon my mother’s death.

Keep_pedalling

blagoslovljena said:

Keep_pedalling said:

This sounds like an immediate post death interest trust not a dodgy PPT. If that is the case your mother will now be the beneficial owner of the whole house, but legal ownership of his share will now be legally owned by the trust. This means it forms part of her estate for IHT purposes but does not form part of her heritable estate. If you and your sibling inherit it after her death then you are the remaindermen, and nothing can be legally to change that. 

If your father’s estate has to go through probate then you will be able to obtain a copy of the will from the probate office once a grant of probate has been issued.

Thank you.

As my father’s estate was under the IHT threshold and everything in the will (outside of the trust mentioned) was due to go straight to my mother, probate wasn’t needed.

If my mother changed her will to exclude me from her share of the house, would I still then be entitled to half of my father’s share that is in trust for my sibling and me, if this is indeed an IDPI trust?

And who are usually the trustees for this sort of trust? Would it be the solicitor that set it up in the first place? Would my sibling and I have been named as trustees as well as beneficiaries? At the time of the will/house purchase I was still on good terms with my sibling, and am named as an executor of my mum’s estate alongside my sibling. But as things stand I want to engage with my sibling as little as possible upon my mother’s death.

Probate would still be required if he had any assets with a financial institution that require probate before it is released, such as large cash deposits or a S&Ss 

blagoslovljena

Keep_pedalling said:

blagoslovljena said:

Keep_pedalling said:

Probate would still be required if he had any assets with a financial institution that require probate before it is released, such as large cash deposits or a S&Ss 

Sorry, for clarity, I can confirm there was no probate as I completed the form exempting myself from being an executor of my father’s will and sent it to my mother, and she emailed my husband to say probate hadn’t been needed.

My parents did have some cash assets, but most of these were kept in accounts in my mother’s name for tax exemption purposes (my mother had a tiny pension from her employment and wasn’t old enough for her state pension at the time).

RAS

An IDPI trust is often chosen because:
It protect half the value of the house from being used to fund care fees for the survivor.
It protects half the value of the house for the children of the marriage if the survivor remarries.
It prevents the survivor wholly disinheriting the children; they get the minimum of half the value of the house.

As an aside, holding the share in trust also protects your from higher rate SDLT (England) and CGT.

This applies even if the house is sold and converted to cash, perhaps as mum goes into care. There will be conditions in the will indicating if your mother is entitled to interest from the capital, or the cash is transferred to the remaindermen on sale.

Normally, the additional trustee(s) would be the remaindermen, unless they are under 18.

Your mother won't know if you order a copy of the deeds. You can also set up a Property Alert, again invisible to the owner. That alerts you if certain searches are made. You can then check if she is attempting to sell or mortgage the property. 

blagoslovljena

RAS said:

An IDPI trust is often chosen because:
It protect half the value of the house from being used to fund care fees for the survivor.
It protects half the value of the house for the children of the marriage if the survivor remarries.
It prevents the survivor wholly disinheriting the children; they get the minimum of half the value of the house.

As an aside, holding the share in trust also protects your from higher rate SDLT (England) and CGT.

This applies even if the house is sold and converted to cash, perhaps as mum goes into care. There will be conditions in the will indicating if your mother is entitled to interest from the capital, or the cash is transferred to the remaindermen on sale.

Normally, the additional trustee(s) would be the remaindermen, unless they are under 18.

Your mother won't know if you order a copy of the deeds. You can also set up a Property Alert, again invisible to the owner. That alerts you if certain searches are made. You can then check if she is attempting to sell or mortgage the property. 

That’s really helpful, thank you.

blagoslovljena

RAS said:

An IDPI trust is often chosen because:
It protect half the value of the house from being used to fund care fees for the survivor.
It protects half the value of the house for the children of the marriage if the survivor remarries.
It prevents the survivor wholly disinheriting the children; they get the minimum of half the value of the house.

As an aside, holding the share in trust also protects your from higher rate SDLT (England) and CGT.

This applies even if the house is sold and converted to cash, perhaps as mum goes into care. There will be conditions in the will indicating if your mother is entitled to interest from the capital, or the cash is transferred to the remaindermen on sale.

Normally, the additional trustee(s) would be the remaindermen, unless they are under 18.

Your mother won't know if you order a copy of the deeds. You can also set up a Property Alert, again invisible to the owner. That alerts you if certain searches are made. You can then check if she is attempting to sell or mortgage the property. 

Actually, sorry, another quick question.

When my mother dies, if I were to complete the form to legally exempt myself from my role as an executor of her will (if she hasn’t changed her will to exclude me as an executor by that point), would that impact the trust (ie my role as a trustee or as one of the remaindermen)?

And is it possible for a trustee to legally exempt themselves from the trustee role and stay one of the remaindermen in the trust?

RAS

You need to get your head round the fact that when your mum dies you might be 2 trustees, for lack a better description, with different roles.

Wills appoint executors, who act as trustees of the assets they garner to settle the estate, which would be your mother's assets only which might include her half of the house.

You might also be a trustee of your father's portion of the house but that is separate from your role as remainderman entitled to half his portion of house.

Same name, differ roles.