Life Interest Trust & IHT400 (both parents passed away no trust set up)

EB2017

Hi All
My parents had mirror Wills set up with a Protective Life Property Interest for each other.  Father died 4 years ago and the Trust was never set up.  Our mother passed away in April 2025.  We gathered all the figures together for IHT (the allowance of my father of £325k and our mothers £325k means the estate is under the IHT threshold so no IHT to pay and is an 'excepted' estate.  We chose a company who would complete the Grant of Probate for a reasonable fee, they confirmed it was an excepted estate and also had conversations regarding the Protective Life Trust element and said it made no difference.  Now their team leader says we need to complete an IHT400 as my father's 50% of the estate was over £250k but that there is still no IHT payable.  The probate company are asking more than double the probate fee to complete the IHT400 (another £1k).  Is an IHT400 still required even though Trust not set up so no income generated and also that the Estate is below the IHT threshold?  We are concerned the probate company just trying to get more money from us or is the IHT400 really required (I think this was a concern we had using an online probate firm so feeling a little silly right now!).

Keep_pedalling

You say the trust was never set up, but that is not true, your mother’s will automatically created the trust even though you may have failed to register it with HMRC.

First thing you should do is sack the probate company, you don’t need them and even worse what they are saying sound very wrong, an IHT return should not be required if her estate is below the 

Can you confirm that they were married and that you have not made any changes to the land registry. 

On the assumption that they were married and that you have not made any unfortunate changes to the land registry, the situation after your father’s death is that legal ownership of his share of the house is owned by the immediate post death interest trust created by the will, but beneficial ownership is with your mother. This means that the whole house forms part of her estate for IHT purposes but none of his NRB was used on this bequest.

EB2017

Thank you Keep_peddaling for your reply.  My parents were married.  After my father passed awa the house was put into my mother's sole name via land registry.    I think is it not my father's will that automatically set up the trust as he was the first to pass away?  All I keep reading is that if a trust was never set up then the Will of the surviving spouse (my mother who then passed away) just reverts to what was set in the Will and that is that the estate (or Trust as it should have been for my father's share and then my mother's share after her passing) is split down to 25% to each of myself and my three siblings.  Then as IHT is not payable and is under the threshold it is an 'excepted estate'.  We are really time conscious as we have a buyer for my parents house and an extra 4-6 weeks for the IHT processing plus 4-12 weeks for grant of probate, we may lose our buyers.  That is if we need to complete the IHT400.  Probate company just keep saying it needs to be completed due to the Protective Life Property Trust even though no IHT to pay, but that it needs to be reported that there was a PLPT as my father's share was over £250k.  Clearly we dont want to pay an extra £1k for a form we dont need but on the same hand we dont want to delay getting the IHT400 completed if we do need to do it.  We feel really struck between a rock and a hard place.  We did our own estate valuing so gave all the figures to the Probate company for them to do probate application (was a bit too much for us to do ourselves and we wanted to make sure it was right so no penalties later down the line).  Our estate figures are rock tight.

Keep_pedalling

EB2017 said:

Thank you Keep_peddaling for your reply.  My parents were married.  After my father passed awa the house was put into my mother's sole name via land registry.    I think is it not my father's will that automatically set up the trust as he was the first to pass away?  

Sorry, I got the order of deaths the wrong way round

All I keep reading is that if a trust was never set up then the Will of the surviving spouse (my mother who then passed away) just reverts to what was set in the Will and that is that the estate (or Trust as it should have been for my father's share and then my mother's share after her passing) is split down to 25% to each of myself and my three siblings.  Then as IHT is not payable and is under the threshold it is an 'excepted estate'.  We are really time conscious as we have a buyer for my parents house and an extra 4-6 weeks for the IHT processing plus 4-12 weeks for grant of probate, we may lose our buyers.  That is if we need to complete the IHT400.  Probate company just keep saying it needs to be completed due to the Protective Life Property Trust even though no IHT to pay, but that it needs to be reported that there was a PLPT as my father's share was over £250k.  Clearly we dont want to pay an extra £1k for a form we dont need but on the same hand we dont want to delay getting the IHT400 completed if we do need to do it.  We feel really struck between a rock and a hard place.  We did our own estate valuing so gave all the figures to the Probate company for them to do probate application (was a bit too much for us to do ourselves and we wanted to make sure it was right so no penalties later down the line).  Our estate figures are rock tight.

I think that by transferring his share to her ended the trust in so there would have been no need to register if with HMRC, but I still don’t see why this means an IHT return needs to be made. Effectively you mother inherited from him so it is covered by spousal exemption and you mother’s estate still has the transferable NRB available.

@poseidon1 might like to comment on the trust situation.

poppystar

Was this trust definitely set up after the father’s death - IPDI - or was it created when he was still living as a property protection trust? The mention of the £250000 figure seems to indicate that the probate company are assuming it was the latter and hence treating it as father giving away his proportion in life which would trigger the need for a full IHT submission where the value of the trust exceeded that £250k threshold.

poseidon1

OP can you confirm whether the PLPT was set up as a standalone trust whilst both parents were alive. If so can you provide a redacted copy of the trust document and confirm the date the trust was set up.

Your confused post is such that the forum contributors have assumed the trust was embedded in your respective parents wills, rather than a separate and distinct free standing entity.

EB2017

poseidon1 said:

OP can you confirm whether the PLPT was set up as a standalone trust whilst both parents were alive. If so can you provide a redacted copy of the trust document and confirm the date the trust was set up.

Your confused post is such that the forum contributors have assumed the trust was embedded in your respective parents wills, rather than a separate and distinct free standing entity.

poppystar said:

Was this trust definitely set up after the father’s death - IPDI - or was it created when he was still living as a property protection trust? The mention of the £250000 figure seems to indicate that the probate company are assuming it was the latter and hence treating it as father giving away his proportion in life which would trigger the need for a full IHT submission where the value of the trust exceeded that £250k threshold.

The PLPT was written into both their Wills by a company called Thy Will Be Done, whilst they were both still alive.  Our father passed away 2021 and Ive been told that the PLPT then took effect.  However a Trust was never registered with HMRC.  Our mother remained in the house, then a year in a care home until she passed away in April 2025.  I think what the Probate company are trying to say is that my father's half share of the property (based on its current value) would be £292k and therefore over £250k which is why it needs to be reported on an IHT400, but that this doesn't change the Nil inheritance liability.  My posts may sound confused and clearly I am !!

EB2017

poseidon1 said:

OP can you confirm whether the PLPT was set up as a standalone trust whilst both parents were alive. If so can you provide a redacted copy of the trust document and confirm the date the trust was set up.

Your confused post is such that the forum contributors have assumed the trust was embedded in your respective parents wills, rather than a separate and distinct free standing entity.

Thank you.  No it wasnt set up as a standalone whilst both my parents were alive.  It was just written into their Wills for presumably when the first of them passed away so that the surviving spouse remained in the house but protected the inheritance to myself and siblings should the remaining spouse remarry etc (ie. house sale proceeds could not be claimed by new spouse).  I think Thy Will Be Done didn't really do my parents any favours writing this into their Wills as they were both in their late 80's and it cost then a few £000's to have their Wills rewritten with this PLPT.

poppystar

Would it be possible for you to post an image of your father’s Will (with all names etc redacted)? This might make it a bit clearer. 

If it was an IPDI trust set up in the Will then the total value of the property, not just your mother’s share would have to be included in her estate. Assume from what you’ve said that would be 2x£292k. So as long as your mother had less than £66k in other assets then, as you say, it should be an excepted estate. AFAIK there is no £250000 threshold playing a part in tha calculations at all.

Are you 100% sure you have all the documentation and that there are no separate trust documents?  

poseidon1

OP seems your family are yet another victim of the atrocious will writing firm Thy Will Be Done (TWBD) who we have encountered recently. Preying on the elderly seems to be TWBD's modus operandi - see thread below

https://forums.moneysavingexpert.com/discussion/6600203/property-probate-trust-nightmare#latest

The information you gave sounded eerily like the case above, hence my wondering if it was a standalone trust similar to that which  occured in the other thread.

Thankfully, from what you say this was not the case.

 However, as with Keep_pedalling I am concerned with you continuing to use TWBD to assist with probate and any technical  IHT compliance that maybe necessary. In my view they  are a dangerously incompetent menace.

I would like to suggest you consult a STEP qualified solicitor ASAP, to explore the possibility that the intended trust in your father's will may have been a nullity from outset.

This could be  on the basis that your father and mother held the property as joint tenants (not tenants in common) and your mother acquired automatic ownership by operation of law. This could be why the Land registry transferred the property to your mother's sole name, and in that scenario the trust automatically fails.

An alternate interpretation of events, is if your parents did hold the property as tenants in common , but by failing to transfer your father's share into the legal names of trustees (whoever they were supposed to be) following his death , this led to your mother to treat the trust as if it did not exsist with the trustees ratifying her actions by failing to fulfil their duties to take legal possession of the trust asset ( ie become registered owners on the land registry subject to a form A Restriction). 

 I assume in this regard there were supposed to be property trustees appointed under the terms of your father's will? Would that have been you and another sibling ?

Either way, cease liaising with with TWBD since they will be keen to cover up any negligence they may be responsible for.  A STEP solicitor should hopefully be able to untangle the mess made by TWBD to enable you to progress with probate sooner rather than later.

If further fees are to be paid, best this goes to a competent adviser. It would be adding insult to injury to allow TWBD any further remuneration from your family.

EB2017

poseidon1 said:

OP seems your family are yet another victim of the atrocious will writing firm Thy Will Be Done (TWBD) who we have encountered recently. Preying on the elderly seems to be TWBD's modus operandi - see thread below  

https://forums.moneysavingexpert.com/discussion/6600203/property-probate-trust-nightmare#latest

The information you gave sounded eerily like the case above, hence my wondering if it was a standalone trust similar to that which  occured in the other thread.

Thankfully, from what you say this was not the case.

 However, as with Keep_pedalling I am concerned with you continuing to use TWBD to assist with probate and any technical  IHT compliance that maybe necessary. In my view they  are a dangerously incompetent menace.

I would like to suggest you consult a STEP qualified solicitor ASAP, to explore the possibility that the intended trust in your father's will may have been a nullity from outset.

This could be  on the basis that your father and mother held the property as joint tenants (not tenants in common) and your mother acquired automatic ownership by operation of law. This could be why the Land registry transferred the property to your mother's sole name, and in that scenario the trust automatically fails.

An alternate interpretation of events, is if your parents did hold the property as tenants in common , but by failing to transfer your father's share into the legal names of trustees (whoever they were supposed to be) following his death , this led to your mother to treat the trust as if it did not exsist with the trustees ratifying her actions by failing to fulfil their duties to take legal possession of the trust asset ( ie become registered owners on the land registry subject to a form A Restriction).   

I assume in this regard there were supposed to be property trustees appointed under the terms of your father's will? Would that have been you and another sibling ?  

Either way, cease liaising with with TWBD since they will be keen to cover up any negligence they may be responsible for.  A STEP solicitor should hopefully be able to untangle the mess made by TWBD to enable you to progress with probate sooner rather than later.

If further fees are to be paid, best this goes to a competent adviser. It would be adding insult to injury to allow TWBD any further remuneration from your family.

Thank you for replying. We have chosen not to use TWBD for probate (I think we knew they were not great and everything they had ever suggested to my parents always came with a large cost).   I seem to recall a letter that TWBD had put the property into tenants in common and the next stage was to set up the Trust, but I think my father didn't go ahead as there was an outrageous cost involved.  We personally completed the Land Registry Form to put the property into our mother's sole name and there was no problem in doing this. To make matters worse my parents had taken out a SAMS mortgage and there is a large amount to go back to the lender.  The firm we are using for probate is a separate firm we chose.

I do think the below as you mentioned is the case for my father's Will and my mother, brother and myself were to be trustees.  The Life Tenant was our mother:

'An alternate interpretation of events, is if your parents did hold the property as tenants in common , but by failing to transfer your father's share into the legal names of trustees (whoever they were supposed to be) following his death , this led to your mother to treat the trust as if it did not exsist with the trustees ratifying her actions by failing to fulfil their duties to take legal possession of the trust asset ( ie become registered owners on the land registry subject to a form A Restriction).   

I assume in this regard there were supposed to be property trustees appointed under the terms of your father's will? Would that have been you and another sibling ?'