Will / trust

Skint_yet_Again

So, I was feeling ok about doing probate but am now worried about the trust. 

I thought it was a will trust / IPDI with dad as trustee / life tenant and beneficial owner. After his death the house became part of his estate and could be sold without transfer to the remaindermen. 

Advice here has been confusing and I have lost confidence. From the remaindermen do not own the property to they own 50% and trusts described as IPID, will trusts, interest in possession, and now bare trusts and its gone from the estate own 100% for IHT to 50% for council tax. 🤯 

I will still contact HMRC about their shoddy reply and whether it is necessary to register the trust, then I will hand over registration / closure to a step solicitor and check the probate position with them to see if I can still diy that part. 

Thank you all for your input & support 

jem16

Skint_yet_Again said:

So, I was feeling ok about doing probate but am now worried about the trust. 

I thought it was a will trust / IPDI with dad as trustee / life tenant and beneficial owner. After his death the house became part of his estate and could be sold without transfer to the remaindermen. 

Advice here has been confusing and I have lost confidence. From the remaindermen do not own the property to they own 50% and trusts described as IPID, will trusts, interest in possession, and now bare trusts and its gone from the estate own 100% for IHT to 50% for council tax. 🤯 

I will still contact HMRC about their shoddy reply and whether it is necessary to register the trust, then I will hand over registration / closure to a step solicitor and check the probate position with them to see if I can still diy that part. 

Thank you all for your input & support 

Good Luck with whatever way you proceed. 

All I can say is that we haven’t transferred the house to my brother and I - we’re executors and remaindermen. We have sold it and just waiting on missives being concluded. It’s still part of Dad’s estate for IHT and no CGT will be due. 

We did get the council tax exemption although honestly didn’t expect to even though the lawyer said she’d never come across a situation like ours that didn’t qualify. She did agree that the wording on the council website indicated that the exemption wouldn’t apply. 

poseidon1

Skint_yet_Again said:

mybestattempt said:

Skint_yet_Again said:

Thank you @mybestattempt you are right I am not reassured by HMRC response. I will telephone and complain and seek clarification but believe that they will still make me register. Thank you for your help & the links. 

Thank you @poseidon1 the house has been valued by 3 estate agents and top value is £170k from 2 agents so I will use that for probate. If the house sells for more I see that you said the trust remaindermen would be personally responsible for any CGT on the trust half. I was under the impression that the trust had ended & the property was not transferred to the remaindermen until after it is sold? I’ve never calculated CGT but assume can deduct estate agent/ solicitor/ accountant fees? Could we also deduct unoccupied house insurance fee or is that an expense of the estate? 

If remaindermen are personally responsible for half any potential CGT could this be taken from the estate shares before distribution? If necessary 2 executors / remaindermen/ beneficiaries could pay from personal funds but we would have to pay for 3rd remainderman/ beneficiary up front and would likely not get it back once the estate has been distributed. (The 3rd remainderman has renounced as executor of trustee / life tenant). 

I have looked at the links. If we have to register the trust I would imagine it would be by me as executor of the deceased trustee / life tenant (dad) for a deceased settlor (mum) of a non-taxable express trust. It says I will need the name of the trust (there is no name/ no trust deed) & details of any land or property that the trust has purchased (none as property was transferred in will?). So I believe I would not include details 

I'm afraid I don't agree with @poseidon1 about the capital gains position.

The IPDI trust created by your Mum's will gave your Dad, as surviving spouse, an interest in possession in the property.

Where there is an IPDI trust in favour of a spouse the trust assets form part of the surviving spouse's estate on death, so your Dad's estate includes the whole property.

• During the period of administration of that estate the personal representatives/executors own the assets of the estate:

https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem6032

If the property is sold by the executors during the period of administration (that is from the estate) the estate is liable for any CGT on the whole property.


• Only if the executors were to convey/transfer/assent ownership of the property out of the estate to the remaindermen/beneficiaries before it is sold does each beneficiary becomes the owner of their respective share of the property and have a personal CGT liabilty when sold:

https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem6072


In your situation, as executors, you will not be conveying/transferring/ assenting the property out of the estate before it is sold, so any CGT liability is that of the estate.

Perhaps when you do sell the property you will come back here for any further advice you need as any CGT report will be due 60 days after the sale.

I thought the IPDI trust ended when dad (trustee & life tenant) died. What is a bare trust?  I will have to get a solicitor 

I would hope you don't need a solicitor. You have come too far in this process for a solicitor to add any value,  especially since there is no IHT payable.

A bare trust is a simple nominee arrangement whereby in this case the original trustees of your father's trust lose their operative trustee powers the moment your father died, and from that point on hold the trust asset (50% of the house) in a purely custodial capacity.

What has  never  been ascertained  in this thread was the identity of the trustees.

In this regard I am guessing your mother's will appointed you and perhaps 1 or other of your siblings to act as trustees, and maybe your father. Certainly, this is part of the  information  you will relate to HMRC if you have to register the trust. Incidentally, the name of the trust will be your mother's full name followed by will trust eg  Jane Mary Smith Will Trust.

With your father having passed ( assuming he was a co trustees) you and sibling/s now stand as surviving 'bare trustees' holding on behalf of the three of you as remaindermen.

This is the nature of the multiple functions you now have in relation to the terminated trust and father's estate which I mentioned in my long post yesterday.

That is to say you are simultaneously 'bare trustees' on behalf of  yourselves of the terminated trust,  as well as being executors on behalf of yourselves as the residuary beneficiaries of  your father's personal estate ( ie the other half of the house, cash, car etc).  Hopefully you now see the multiple hats you wear in this matter

As intimated early in this thread, given the joint values for the terminated trust and residual estate, this must qualify as an excepted estate, and once you are sure of your final estate assets and liabilties it must be possible for you to use the online  application process yourself to obtain probate without delegating that final task to a solicitor. 

I would suggest give it a  try first and see how you get on. With no IHT payment deadline to worry about, you have time to work at your pace.

mybestattempt

@Skint_yet_Again

I was wrong in my analysis of the property ownership and capital gains tax position. My apologies for the distress this caused.

@poseidon1 and I have disagreed on a number of issues in other threads; sometimes he got it wrong and sometimes I did.

This time I acknowledge that his analysis of the property ownership and where any capital gains tax liabilities should fall is correct.


I too, urge you to do the probate application.

The trust registration and council tax are separate issues and capital gains tax may, or may not, be an issue after the property is sold which will be months in the future.

Again, my apologies and acknowledgement of my errors.

poseidon1

mybestattempt said:

@Skint_yet_Again

I was wrong in my analysis of the property ownership and capital gains tax position. My apologies for the distress this caused.

@poseidon1 and I have disagreed on a number of issues in other threads; sometimes he got it wrong and sometimes I did.

This time I acknowledge that his analysis of the property ownership and where any capital gains tax liabilities should fall is correct.


I too, urge you to do the probate application.

The trust registration and council tax are separate issues and capital gains tax may, or may not, be an issue after the property is sold which will be months in the future.

Again, my apologies and acknowledgement of my errors.

Actually, I think it very useful for those of us with a higher degree of technical knowledge and experience to engage in contributing to these kinds of queries.

Occasionally we may err in the accuracy of our responses.  No one's perfect and in my case long retired , but having sufficient sage heads bringing to bear on a problem ,cross checking and correcting  each other when needed hopefully gets to most helpful outcomes for OP's.

In this regard @mybestattempt, good to see you generally returning to the fray to offer  expertise, input and observations. MSE forums can only benefit the longer we feel happy to engage with these matters.

Skint_yet_Again

I am just having a bit of a break / holiday so I will look at it again when I get back. I would still like to thank you all because I certainly know a lot more than I did when I started this thread. Just a bit of information overload 😵‍💫🤯

@poseidon1 mums will made dad alone the executor and trustee (edit: unless he died first, renounced or refused or was unable then it was 3 daughters) Dads will stated if mum pre deceased him the 3 daughters were to be executors and trustees. The half share of the house in trust or any proceeds of sale to be shared equally between the 3 daughters when dad ceased to use it as his principal place of residence (when he died?) 

It looks like we will not be entitled to the exemption from council tax as dad was not the sole owner. So we 3 remaindermen will be charged council tax as second homes. 😕 I am still waiting for them to write to me to ask for the information they need as they said they would when I spoke to them. Hopefully we will not get the premium 100% extra charge if the house is on the market (max 12 months). 

Tresinia511

Sya, wow,  if there is a takeaway from this for me personally, it is to stay away from trusts

jem16

Skint_yet_Again said:

It looks like we will not be entitled to the exemption from council tax as dad was not the sole owner. So we 3 remaindermen will be charged council tax as second homes. 😕 I am still waiting for them to write to me to ask for the information they need as they said they would when I spoke to them. Hopefully we will not get the premium 100% extra charge if the house is on the market (max 12 months). 

My advice would be to apply anyway.

I was sure we wouldn’t get the exemption either but I filled in their form and explained the situation truthfully. We were given the exemption and what turned out to be a £90 bill based on a 10% discount turned into a £400 credit and exemption from January. 

Skint_yet_Again

Thanks @jem16 we have been given the death / probate exemption automatically after doing “tell us once”. I phoned them to advise about the trust and they said they will look at the land registry and then write to me. I told them land registry was not changed after mum died & trust was created. They said it depends on who the legal owner is. (Dad is beneficial owner but not the only legal owner?) I said I would take their letter to a solicitor. 

poseidon1

Skint_yet_Again said:

I am just having a bit of a break / holiday so I will look at it again when I get back. I would still like to thank you all because I certainly know a lot more than I did when I started this thread. Just a bit of information overload 😵‍💫🤯

@poseidon1 mums will made dad alone the executor and trustee (edit: unless he died first, renounced or refused or was unable then it was 3 daughters) Dads will stated if mum pre deceased him the 3 daughters were to be executors and trustees. The half share of the house in trust or any proceeds of sale to be shared equally between the 3 daughters when dad ceased to use it as his principal place of residence (when he died?) 

It looks like we will not be entitled to the exemption from council tax as dad was not the sole owner. So we 3 remaindermen will be charged council tax as second homes. 😕 I am still waiting for them to write to me to ask for the information they need as they said they would when I spoke to them. Hopefully we will not get the premium 100% extra charge if the house is on the market (max 12 months). 

Ok OP, by  not specifically including you and siblings as additional trustees of your mother's will this represented very  poor drafting and complete lack of foresight by the solicitor concerned.

Not to worry however, where a sole trustee dies, the executors of their will automatically takes their   place by operation of law.   In this case you and your siblings takeover the reins but purely as 'bare trustees ' in conveying the trust assets back to the yourselves. So the same end result is achieved.

This also simplifies the trust registration issue  if HMRC insist on pushing for it, since the sole trustee ( your father ) had the primary responsibility to register and with his passing both the trust and his trusteeship died with him.

If this was not clear in your original letter, may be worth another call to HMRC  and trying to get through to someone at supervisor level who can hopefully exercise a degree of discretion in your favour. However if they still push for registration, the process should be a little bit simpler to complete.

In passing,  the solicitor's negligence  in leaving your father as sole trustee and life tenant meant that he was  in fact the sole owner of the entire property both legally ( as sole trustee) and beneficially in the eyes of trust and tax law.  On this basis I believe you have a legitimate basis to claim entitlement to the empty property discount, and should strongly push for it on these facts.