Buying out an Interest in Possession Trust

poseidon1

jsh99 said:

poseidon1 said:

jsh99 said:

poseidon1 said:

jsh99 said:

Hi all,

I am sure some will remember my situation.  

Mother died leaving her half of property to me but in IPDT for my brother that has no clause for ending expect my brothers death.  If the property is sold my half has to be invested for his benefit.

He is currently in a nursing home, self funding.

I have LPA.

In a previous thread we talked about a DOV but was advised against that as he may be deemed to have 'deliberately depravated' his assets once his money runs out.

He has already spent almost £90,000 and has potential to fund another approx 190,000 of fees.

His half of the house, which he already owned, is worth approx 225,000.

Would this still be seen as 'deliberate deprivation' if he did a DOV to allow me my half? I would need his consent to this I know.  I saw in another thread someone mentioned about already having spent/having quite a reasonable amount of funds and in that case it may not be seen as DoA.


What about if he bought me out with the funds he currently has?  It would be less than half but I as the only other beneficiary of mothers will would accept that amount.

This would mean he would have the whole value of the house to spend on care once it is sold - and would be more than if my half was invested.

Is this also classed as 'deliberate deprivation' and would we still need a DOV?  Does he have to agree to this as it's in his financial favour or can I as LPA go ahead with a solicitor?

(I am waiting to speak to my solicitor, who dealt with probate etc, but they are on holiday for a fortnight)

Many thanks.

I refer you back to my single ( but hopefully) comprehensive post on your predicament below -

https://forums.moneysavingexpert.com/discussion/6571423/immediate-post-death-interest-anything-i-can-do#latest

From what you are now saying nothing has materially changed since then? Ie your brother's mental capacity to engage in a Saunders v Vautier termination or variation  of the trust remains in question?

I indicated you needed specialist advice, that observation remains unchanged you will be going around in circles without that advice. This forum will not be able to add anything meaningful to your original query last November or the question you raise now.

Any changes to current arrangements largely turns on your brother's mental capacity and to what extent the various state agencies  involved consider his well being paramount above all else. 

I did reply with some answers at the time.

The solicitor engaged someone to determine if my brother had capacity to be able to sign the LPA originally and they said he had.  Nothing has changed since that point.  

But would it not be better to have an additional 225,000 to pay for care up front than what say 12,500 pa at 5% interest?  12,500 a year isn't going to go very far at home fees.  Having the whole 550,000 to spend will go a lot further?  I'm not seaking my whole half - so he's better off in the long run.

You would not be entitled to your whole half in any event.

The valuation process involved in a life tenant ( your brother ) buying out a remainderman ( yourself) is a complicated actuarial calculation. The thread below indicates the factors involved

https://forums.moneysavingexpert.com/discussion/6617150/partition-of-trust-and-tax-implications#latest

If your brother's life expectancy is not radically affected by his disability, a calculation of what your interest as  remaindeman is worth could be quite disappointing to you.

However, from your perspective you might see this as a worth while price to pay to extricate yourself from the burden of onerous trusteeship likely to run for many many years. On that basis, you could indeed explore an actuarial buyout ( by your brother) of your beneficial remainderman interest.

Whether that excercise can be facilated via a variation of the will, you will need to explore with the legal adviser, but an actuarial calculation appears to be a given.

I see - he's 77 now, I see the average life expectancy for a male in the UK is 81.  Although our mum lived to 96 - he never knew his father so I have no idea on the health on that side of things.

As the invested amount will never grow - there is the potential that when I finally receive the money inflation has made it worth a lot less than it is now anyway.

I can't see anything else about how to work out a rough value on the other thread.  To be honest I'd be happy to get anything as I could really do with getting out of a sticky situation at home and I really can not wait another 4-5 years, there is quite a potential that I won't live that long.

His age certainly helps the calculation in your favour, but you can't do it.

 You are not an actuary. Thread was supplied merely to illustrate the factors involved in arriving at an outcome in general cases. Every single case will be different. So back to a legal adviser, this is not a DIY matter.

As for the trust fund not growing, that would only be based on whether as trustee you thought it inappropriate to invest in a stockmarket portfolio on the assumption your brother might not live the 5 to 7 years thought suitable for this form of investing. 

Keep_pedalling

sheramber said:

At present he has the whole value of the house available for his care. 

Plus any other savings of £X

If he buys you out he still has the whole value of the house but his savings are now£X - whatever amount he  pays you. 

He loses out by the amount he pays you.

As he is entitled to all the value of the house, if necessary for his care, you could end up with nothing if it is all used up. 

What is the position with the house? Is it empty? 

He only has access to the income from 50% of the value the capital is protected.

Keep_pedalling

jsh99 said:

Keep_pedalling said:

You do have 2 years, but giving up the income from the trust would almost certainly be deemed as deliberate deprivation of assets. 

Even though he'd end up with MORE money?  He'd have the whole value of the property to spend on care - not half of it and say 12,500pa at 5%

He will have\to spend over 590,000 pounds roughly.

Sorry I misunderstood what you were trying to achieve here please ignore my comment.

jsh99

sheramber said:

At present he has the whole value of the house available for his care. 

Plus any other savings of £X

If he buys you out he still has the whole value of the house but his savings are now£X - whatever amount he  pays you. 

He loses out by the amount he pays you.

As he is entitled to all the value of the house, if necessary for his care, you could end up with nothing if it is all used up. 

What is the position with the house? Is it empty? 

No I don't believe he is entitled to the whole value of the house - because half the house was mums and her will says it's in an IPDT - which means half the sale proceeds cannot be used to pay for his care but rather have to be invested and only the interest paid to him.  On his death my half that was invested becomes mine.

jsh99

I see - he's 77 now, I see the average life expectancy for a male in the UK is 81.  Although our mum lived to 96 - he never knew his father so I have no idea on the health on that side of things.

As the invested amount will never grow - there is the potential that when I finally receive the money inflation has made it worth a lot less than it is now anyway.

I can't see anything else about how to work out a rough value on the other thread.  To be honest I'd be happy to get anything as I could really do with getting out of a sticky situation at home and I really can not wait another 4-5 years, there is quite a potential that I won't live that long.

His age certainly helps the calculation in your favour, but you can't do it.

 You are not an actuary. Thread was supplied merely to illustrate the factors involved in arriving at an outcome in general cases. Every single case will be different. So back to a legal adviser, this is not a DIY matter.

As for the trust fund not growing, that would only be based on whether as trustee you thought it inappropriate to invest in a stockmarket portfolio on the assumption your brother might not live the 5 to 7 years thought suitable for this form of investing. 

Ah I see - OK I am waiting on the solicitor getting back off holiday so will have to see what they say.

But in effect her will end up with more money to pay for his care - because if he buys me out I won't get half - so surely that's actually better and not a deprivation of assets.

Solicitor did mention buying property - but I am not sure I want the hassle of dealing with my brothers affairs as a landlord - surely that will push me over the edge!!  Why is it down to me - because I am LPA?