Will Trust , what sort of trust is it and is IHT due ?

Pumpkinqueen21

Hello everyone, I hope you can shed some light on this. 

Mum dies two weeks ago. We all lived together in the same house. We thought she had rewritten her will to make me sole beneficiary, we saw a draft but i’m guessing it was never finalised.
Instead we have the will that states that my wife and I are to be lifetime tenants and I am to be trustee and executor.
We are to maintain the property and after the last one of us dies, it reverts to my sister or her son ( mums grandson)
Bit of a shocker as its left us in a precarious financial state since we sunk our pension pots into the family home expecting to be able to equity release that back, but I guess that's gone now. 

My main question is, will there be IHT. Property is worth 400k and as it is technically going to direct descendants, I thought it would be free from IHT, except this trust has confused the hell out of us. None of us expected this. And what sort of trust is this called and will it need to be registered and go through probate? 

Can anyone help with answers.
Thanking you in advance.

Keep_pedalling

Was your mother a widow? If she was and inherited her husband’s estate then there will be no IHT as you have 2x NRB to claim. 

If she was not a widow then it is more complex. What sort of relationship do you have with your sister? Is her son over 18?

The trust sounds like am immediate post death interest trust and it has to be registered with HMRC within 2 years of her death.

Keep_pedalling

When you put your money into your home was anything documented about this payment? Could it be seen as a loan to your mother?

Marcon

Pumpkinqueen21 said:

Hello everyone, I hope you can shed some light on this. 

Mum dies two weeks ago. We all lived together in the same house. We thought she had rewritten her will to make me sole beneficiary, we saw a draft but i’m guessing it was never finalised.
Instead we have the will that states that my wife and I are to be lifetime tenants and I am to be trustee and executor.
We are to maintain the property and after the last one of us dies, it reverts to my sister or her son ( mums grandson)
Bit of a shocker as its left us in a precarious financial state since we sunk our pension pots into the family home expecting to be able to equity release that back, but I guess that's gone now. 

My main question is, will there be IHT. Property is worth 400k and as it is technically going to direct descendants, I thought it would be free from IHT, except this trust has confused the hell out of us. None of us expected this. And what sort of trust is this called and will it need to be registered and go through probate? 

Can anyone help with answers.
Thanking you in advance.

Yes - a lawyer who has seen the will and also been given all relevant facts by you, especially around the funds you contributed to the family home. Nobody here can offer sensible input in the absence of pretty much all crucial information.

Possibly this isn't the moment to do it, given your mum only died two weeks ago and bereavement always leaves emotions raw in the immediate aftermath, but once the initial shock has worn off I suggest you make a start on sorting out the mess. 

Pumpkinqueen21

Yes, mum was a widow, we were concerned that IHT would be due because of the fact its a post death trust.
Looking at the will the terms of the trust suggest that if it was ever dissolved, even if we wanted to challenge it to get our investment back, everything will go to the beneficiary. The only asset is the house where we lived with and cared for mum. Plus she has left us in an absolute bind financially doing this. We are 64 and 68 now so there goes our private pension we invested in the house. We read so many opposing views, such as trustees can equity release and trustees cannot do anything except manage the trust. And i’m not sure about yearly tax returns on something that is just a house with no income generated from it whilst its in a trust.

Keep_pedalling

Pumpkinqueen21 said:

Yes, mum was a widow, we were concerned that IHT would be due because of the fact its a post death trust.
Looking at the will the terms of the trust suggest that if it was ever dissolved, even if we wanted to challenge it to get our investment back, everything will go to the beneficiary. The only asset is the house where we lived with and cared for mum. Plus she has left us in an absolute bind financially doing this. We are 64 and 68 now so there goes our private pension we invested in the house. We read so many opposing views, such as trustees can equity release and trustees cannot do anything except manage the trust. And i’m not sure about yearly tax returns on something that is just a house with no income generated from it whilst it’s in a trust.

As your mother was a widow then the estate does not have an IHT liability and you don’t need to do an IHT return so there is no hurry there is no hurry to sort out the estate. 

The thing to concentrate on at the moment is the money you put into the home which should rightly give you a financial interest in the property. Was any documentation made that would determine if this was a loan or a gift? 

SVaz

Did your Mum already own the house and you pumped money into renovations or an extension etc.  or did she buy a new property which included your contribution?  If the latter, why aren’t you on the Deeds as joint owners? 

Pumpkinqueen21

Hiya, yes mum owned the house but being the funny old lady she was, and as we had out own troubles when we first moved in with her, she would not countenance that. Some years down the line when we found out about the will, the family got together with a solicitor and said no, this will was terrible and effectively side stepped me and my wife, leaving us as lifelong tenants with my sister and or her son inheriting as beneficiaries once my wife and I were dead.
A new will was drawn up leaving me as sole beneficiary and asking that after I equity released our money back, the remainder we would then will to my nephew and everyone was happy and agreeable. We all saw the new will draft. It is our understanding that when she went to sign that, she did not. 

Whichever way you look at this, it is my understanding from my research that if the trust is to be broken at a financial cost we don't have then the asset goes to the beneficiaries it would seem, whichever way yo go at this.

Keep_pedalling

How much did you contribute to the house? You have stated that your mother was to take equity release to pay you back, which tells me that this was a loan not a gift so it is now a debt owed to you by the estate. This needs to be protected by either having a share of the house being transferred to you and the remainder going into trust as per the will or placing a charge on the house. 

You also say everyone was happy with the new arrangement if this is still the case then this can all be sorted out with deed of variation made by your sister and her son (providing he is an adult) have you spoken to them about this mess?

One more thought, if the new will was drafted by a solicitor,have you checked with them that they don’t hold the signed will?

Pumpkinqueen21

Thank you all for your help. We have now seen the solicitor and unless we want to pay a lot of money and fees to either challenge the will or break the trust, whatever we do will only ultimately push everything into the hands of the beneficiaries. It was confirmed that mum never signed the new will. Just decided to shaft the two people who gave up their lives to care for her. We are lifetime tenants only now, with no hope of getting our money we invested back. Even if we could sue, the trust always, once broken reverts all to beneficiary.

Keep_pedalling

Pumpkinqueen21 said:

Thank you all for your help. We have now seen the solicitor and unless we want to pay a lot of money and fees to either challenge the will or break the trust, whatever we do will only ultimately push everything into the hands of the beneficiaries. It was confirmed that mum never signed the new will. Just decided to shaft the two people who gave up their lives to care for her. We are lifetime tenants only now, with no hope of getting our money we invested back. Even if we could sue, the trust always, once broken reverts all to beneficiary.

Sorry you find yourself in this mess. Can you answered my earlier questions about the terms under which you provided the money to your mother. It still sounds like a loan to me in which case the estate owes you that money and it does not form part of her estate.