Grandfathers SIPP and other trusts

RAS

And get the trust registered with HMRC ASAP.

wolveswolves29

Great thank you! This is exactly my concerns overall I’m not trying to get any money or be nosy, I was extremely close to my grandad and he took me on like a dad when I didn’t have one and was also very open about finances with me Iv seen a number of wills over the years and asked a lot of questions , just wish Alzheimer’s never got the better of him and I could ask them now , dose this protect some of the assets from care home fees? Just curious as I’m only 30 considering redoing my will and would also like some sort of protection from care home or anything like that, also I’m urging my mother to double check hers as she is approaching 60+ 

RAS

IPDI Trusts under current law achieve a number of things. With property, they often need to be combined with severing the tenancy on a property if not bought as tenants in common.

They can protect a portion of the property from care home fees and from second marriages, because these invalidate previous wills (England and Wales).

They designate eventual beneficiaries, but as the property is in trust it does not:
Create a liability for CGT
Attract higher SDLT fees
Affect benefit entitlements
Remove first buyer's benefits
Form part of the beneficiary's assets for divorce or insolvency.

Can be a bit of a pain where house values are very low.

wolveswolves29

Thank I’ll have to try get in a touch with a solicitor in the near future the house is 500k+ but my nans already spent 300k care home fees and it’s eating her know it’s getting spent on it we are easy on and want what’s best for Nan but when there sitting in care home texting you about it once a week it gets tiring lol we was trying to think of ways of keeping it in the family me buying it or my brother renting it! But I think it’s slightly out my price range lol

poseidon1

RAS said:

IPDI Trusts under current law achieve a number of things. With property, they often need to be combined with severing the tenancy on a property if not bought as tenants in common.

They can protect a portion of the property from care home fees and from second marriages, because these invalidate previous wills (England and Wales).

They designate eventual beneficiaries, but as the property is in trust it does not:
Create a liability for CGT
Attract higher SDLT fees
Affect benefit entitlements
Remove first buyer's benefits
Form part of the beneficiary's assets for divorce or insolvency.

Can be a bit of a pain where house values are very low.

Good summation from @Ras. 

Also agree that these forms of trusts despite their benefits do come with conceptual and administrative baggage that not many are  equipped to handle.

Therefore they can indeed be more  trouble than they are worth with low value estates, and  even in more worthwhile situations one needs to be cognizant of the abilities of those you choose to be trustees to administer such a trust going forward ( can be a steep learning curve for many).

In my case, there is no one in my family who would be suitable as trustee for aspects of my own estate ( single, unmarried, no kids).  Friends would be far too old and in any event lack personal investment/tax and legal experience, so  unfortunately  I will have to rely on a lawyer ( or accountant) to act as professional trustee for a will trust set up in favour of Spanish born/resident beneficiaries. 

wolveswolves29

My grandad not by trade was excellent with money for as far as I can remember the tv would have a mixture of football/cricket and Bloomberg , I just wish they would bring in a care home fee if my house was suitable enough I’d have my nan live with me it’s ridiculous or in another instance I just wished they enjoyed there money more they went on 3-4 holidays a year never drove a flashy car but wish they just brought some luxury stuff for themself when they was able too

poseidon1

wolveswolves29 said:

Thank I’ll have to try get in a touch with a solicitor in the near future the house is 500k+ but my nans already spent 300k care home fees and it’s eating her know it’s getting spent on it we are easy on and want what’s best for Nan but when there sitting in care home texting you about it once a week it gets tiring lol we was trying to think of ways of keeping it in the family me buying it or my brother renting it! But I think it’s slightly out my price range lol

In that case the trust is worth £250k+ the capital of which should be ringfenced completely from any care home fees. Only Investment  income generated from the trust fund should be made available for care home fee payments.

What I found significant with the way the trust was drafted, was clause 4.5 stopped short of granting the trustees overt discretionary powers to advance the entire trust capital to the life tenant for her absolute use and benefit. Had the testator intended that this should be an option open to the trustees, the clause would have been expanded accordingly.

Indeed, even if the trustees were minded to break the trust in this way to their own detriment as residual  beneficiaries, it would likely constitute a material breach for which the 2% residuary beneficiaries ( the grandchildren ) would have a legal claim to compensation for breach of trust.

As I previously observed, your grandfather and solicitor knew what they were about when putting this trust arrangement together.

wolveswolves29

Thank you honestly I’m learning so much from this I spoke to my mother last night she stated the house is getting sold and by the end of the month it will be sold , dose that mean the whole house will go into trust or will my grandmother receive some of the money available from the sale my understanding is grandmother received 50% and my mom and aunty 25% each into the respective trust?

poseidon1

I see you are also having difficulties here despite the explanation.

Once sold your grandmother keeps 50% which is her 1/2 share which she will no doubt use for nursing home fees.

The other half must be placed  in a separate trust bank account and invested to pay your grandmother income for the rest of her life. Your mother and aunt only get the trust capital after grandmother dies and even then the split is 49% each of the trust fund, with a further 1% each to grandchildren ( see clauses 8.1 to 8.4).

Your mother and aunt should have been on the legal title of the house after getting probate of granddad's will. If they are not, they must be careful to ensure the conveyancing solicitor splits the money in the way I outline rather than pay the whole lot to grandmother by mistake.

As  I indicated a meeting to discuss all this with a knowledgeable solicitor, and how to deal with trust income tax thereafter , is long overdue. My sense is your mother and Aunt ( as trustees ) will have problems handling trust tax reporting by themselves.

RAS

wolveswolves29 said: ...will my grandmother receive some of the money available from the sale my understanding is grandmother received 50% and my mom and aunty 25% each into the respective trust?

No, grandmother receives half the money, assuming there is no deed of trust declaring a different split in the tenancy in common. Given your previous comments about the cost of care, that may be used to pay or repay those costs and the rest used going forward. Grandmother will need a new social services assessment unless she is completely self funding.

The rest of the money is held in trust and must be invested to provide income for grandmother's care. The trustees may be mom and aunty, but be neither gets any money from the sale now. They need to make absolutely sure that half the sale money goes into an account for that purpose. poseidon1 has suggested suitable income bonds that could meet that requirement. 

When grandmother dies, the money in the Trust account is split in line with the rules in the will. 

At that point whatever is in grandmother's own accounts is divided up based with her will.

Just to reiterate that mom and aunty must see a properly qualified solicitor before the house sale is complete and registration of the Trust with HMRC is overdue.

If they don't do this, and social services or the OPG find out, neither mom or aunty will be allowed to be attorney for grandmother and they will have to repay any misdirected funds, plus any penalties. There could also be issues with HMRC if they don't get that sorted out as well, quickly.