Inheritance tax help

RAS

No-one's going to worry about that. The fact you got the whole lot posted is the important bit. 

GillyB26

poseidon1 said:

Keep_pedalling said:

poseidon1 said:

GillyB26 said:

My son (15) has inherited his Aunty's house, but it's in trust until he's 25. Her partner (early 70's) has life tenancy. Who will be liable for paying the IHT (approx 60k)? My Solicitor has told me it's the partner with the life tenancy, but that doesn't seem correct to me. The life tenant has been told by his legal helper (not a Solicitor) that it's my son who is liable but I will need to pay it on his behalf? I'm really worried as there is no way I can afford to pay it. The house is worth approx £450k.

This sounds like a complete an utter mess.

Taking most of what you say at face value, there appears to be a £475k estate split £450k the house and £25k cash.

The unmarried Aunt purportedly left the house on life interest to partner, with small pecuniary cash legacies in respect of the £25k.

Problem here there is only a £325k nil rate band, so the remaining £150k estate carries a tax burden of £60k at 40%.

If it was not for that fact the solicitors were the original executors, this had all the hallmarks of a DIY will made by someone who had no idea what they were doing.

However, this appears to be a solicitor drafted will, with the firm concerned looking to back out of a mess they appear to be responsible for.

Right now if the will is entirely silent on the issue of IHT, then tax is payable by each recipient in proportion to the amount they immediately inherited. However the majority of the IHT bill is payable on the house, which clearly should be sold unless the surviving partner wants to pay from his own resources. Neither your son or yourself have any IHT exposure beyond the small amount due on his £5k legacy.

Returning to the firm that drafted the will and  who were supposed to be executors, there is a possibility that they could have been negligent in not realising the  IHT consequences of what they had drafted given the unmarried status of their client.

 It seems to me the life interest beneficiary should be taking legal advice on the possibility of suing the firm for damages for what appears to faulty advice, since he stands to lose the most at this stage.

However, this will be of no concern to HMRC who will want their £60k 6 months after death, so the life tenant ( especially ) will need to get his head around the fact that the lion's share of the tax needs to be raised from the property or himself ( HMRC are not concerned which). Worse case scenario HMRC raise an assessment, place a legal charge on the house and force a sale to recover. The partner can't bury his head in the sand.

At this moment in time, and with the solicitors having renounced, who are the replacement executors/trustees?

As for the age 25 vesting age for your son, that is a confusing provision and it would be helpful to have sight of a redacted copy of the will to determine exactly to what that relates.

Would it be possible, depending on the wording of the will, that the bequest that create the IPDI trust could actually fail if the house has to be sold?

Need to see the redacted will in its entirety.

If it is as really badly drafted as it sounds then it could  state all bequests IHT free including the house trust, so back to square one with regard to  proportionate IHT charges across the board.

IPDI trust would normal provide for replacement property and downsizing scenarios. If so probably still a valid trust after paying relevant tax and ( forced)  downsizing accordingly.

OP can you confirm that solicitor who renounced executorship actually drafted the will?  I remain of  the mind there could be  professional negligence with regard to seemingly drafting a tax inefficient will without warning the client of the obvious consequences. Although  its possible solicitor was not overtly  told the parties were not married,  but that is not something a professional is entitled to assume when taking instructions. 

Yes, the Solicitor that drafted the will is the one that should have been the Executor. They've refused to give a reason why they have renounced. 

GillyB26

poseidon1 said:

GillyB26 said:

My son (15) has inherited his Aunty's house, but it's in trust until he's 25. Her partner (early 70's) has life tenancy. Who will be liable for paying the IHT (approx 60k)? My Solicitor has told me it's the partner with the life tenancy, but that doesn't seem correct to me. The life tenant has been told by his legal helper (not a Solicitor) that it's my son who is liable but I will need to pay it on his behalf? I'm really worried as there is no way I can afford to pay it. The house is worth approx £450k.

This sounds like a complete an utter mess.

Taking most of what you say at face value, there appears to be a £475k estate split £450k the house and £25k cash.

The unmarried Aunt purportedly left the house on life interest to partner, with small pecuniary cash legacies in respect of the £25k.

Problem here there is only a £325k nil rate band, so the remaining £150k estate carries a tax burden of £60k at 40%.

If it was not for that fact the solicitors were the original executors, this had all the hallmarks of a DIY will made by someone who had no idea what they were doing.

However, this appears to be a solicitor drafted will, with the firm concerned looking to back out of a mess they appear to be responsible for.

Right now if the will is entirely silent on the issue of IHT, then tax is payable by each recipient in proportion to the amount they immediately inherited. However the majority of the IHT bill is payable on the house, which clearly should be sold unless the surviving partner wants to pay from his own resources. Neither your son or yourself have any IHT exposure beyond the small amount due on his £5k legacy.

Returning to the firm that drafted the will and  who were supposed to be executors, there is a possibility that they could have been negligent in not realising the  IHT consequences of what they had drafted given the unmarried status of their client.

 It seems to me the life interest beneficiary should be taking legal advice on the possibility of suing the firm for damages for what appears to faulty advice, since he stands to lose the most at this stage.

However, this will be of no concern to HMRC who will want their £60k 6 months after death, so the life tenant ( especially ) will need to get his head around the fact that the lion's share of the tax needs to be raised from the property or himself ( HMRC are not concerned which). Worse case scenario HMRC raise an assessment, place a legal charge on the house and force a sale to recover. The partner can't bury his head in the sand.

At this moment in time, and with the solicitors having renounced, who are the replacement executors/trustees?

As for the age 25 vesting age for your son, that is a confusing provision and it would be helpful to have sight of a redacted copy of the will to determine exactly to what that relates.

The Solicitor that has renounced has told us the the residual beneficiaries (as I understand it that's the Partner, the best friend and my son, with me acting on his behalf) are now responsible for administering the will. We need to put someone in charge of doing that but we can't agree who it should be. I suggested my Solicitor should do it because in addition to the mess that the will is in the Best friend doesn't trust the life partner so doesn't want his Solicitor dealing with the will, in fact she wants to try to get him removed but I'm not supporting her in that. My concern is that if we use my Solicitor I'll end up with a large bill I can't afford to pay. So as it stands nothing is being done with the will and time is ticking. The whole thing is really worrying me, ultimately I just want what's best for my son.  

Keep_pedalling

GillyB26 said:

poseidon1 said:

Keep_pedalling said:

poseidon1 said:

GillyB26 said:

My son (15) has inherited his Aunty's house, but it's in trust until he's 25. Her partner (early 70's) has life tenancy. Who will be liable for paying the IHT (approx 60k)? My Solicitor has told me it's the partner with the life tenancy, but that doesn't seem correct to me. The life tenant has been told by his legal helper (not a Solicitor) that it's my son who is liable but I will need to pay it on his behalf? I'm really worried as there is no way I can afford to pay it. The house is worth approx £450k.

This sounds like a complete an utter mess.

Taking most of what you say at face value, there appears to be a £475k estate split £450k the house and £25k cash.

The unmarried Aunt purportedly left the house on life interest to partner, with small pecuniary cash legacies in respect of the £25k.

Problem here there is only a £325k nil rate band, so the remaining £150k estate carries a tax burden of £60k at 40%.

If it was not for that fact the solicitors were the original executors, this had all the hallmarks of a DIY will made by someone who had no idea what they were doing.

However, this appears to be a solicitor drafted will, with the firm concerned looking to back out of a mess they appear to be responsible for.

Right now if the will is entirely silent on the issue of IHT, then tax is payable by each recipient in proportion to the amount they immediately inherited. However the majority of the IHT bill is payable on the house, which clearly should be sold unless the surviving partner wants to pay from his own resources. Neither your son or yourself have any IHT exposure beyond the small amount due on his £5k legacy.

Returning to the firm that drafted the will and  who were supposed to be executors, there is a possibility that they could have been negligent in not realising the  IHT consequences of what they had drafted given the unmarried status of their client.

 It seems to me the life interest beneficiary should be taking legal advice on the possibility of suing the firm for damages for what appears to faulty advice, since he stands to lose the most at this stage.

However, this will be of no concern to HMRC who will want their £60k 6 months after death, so the life tenant ( especially ) will need to get his head around the fact that the lion's share of the tax needs to be raised from the property or himself ( HMRC are not concerned which). Worse case scenario HMRC raise an assessment, place a legal charge on the house and force a sale to recover. The partner can't bury his head in the sand.

At this moment in time, and with the solicitors having renounced, who are the replacement executors/trustees?

As for the age 25 vesting age for your son, that is a confusing provision and it would be helpful to have sight of a redacted copy of the will to determine exactly to what that relates.

Would it be possible, depending on the wording of the will, that the bequest that create the IPDI trust could actually fail if the house has to be sold?

Need to see the redacted will in its entirety.

If it is as really badly drafted as it sounds then it could  state all bequests IHT free including the house trust, so back to square one with regard to  proportionate IHT charges across the board.

IPDI trust would normal provide for replacement property and downsizing scenarios. If so probably still a valid trust after paying relevant tax and ( forced)  downsizing accordingly.

OP can you confirm that solicitor who renounced executorship actually drafted the will?  I remain of  the mind there could be  professional negligence with regard to seemingly drafting a tax inefficient will without warning the client of the obvious consequences. Although  its possible solicitor was not overtly  told the parties were not married,  but that is not something a professional is entitled to assume when taking instructions. 

Yes, the Solicitor that drafted the will is the one that should have been the Executor. They've refused to give a reason why they have renounced. 

I think the reason is pretty obvious in that the will they have drafted has consequences that they are incapable of dealing with or don’t want to deal with a partner who thinks he has the right to remain there when the reality is is is going to have to be sold. How the hell they did not factor IHT into this I have no idea, but it obvious that with all the IHT falling on the bequest involving the house even if there was enough cash in the estate it would still need to be sold to pay that bill.

The trust situation is quite complex as well, as I read it once the house is sold and IHT paid then the remaining equity is to be held in trust with the partner entitled to the income from that trust. Once he dies, marries or cohabits then that trust ends and the capital goes into a new trust that your son will only receive if he obtains the age of 25. 

This really requires the help of professionals not only to handle the tax and trust elements but to avoid getting directly involved with the partner.

poseidon1

OP, firstly  I will apologise for maligning the solicitors by jumping to conclusions based on your misunderstanding of the all important  ' Property Fund ' clause.

From my perspective the will is a reasonably well crafted document outlining in acute detail your son's Aunt's testamentary wishes. That said, there  is an omission mentioned below which could have avoided the current angst..

As you surmised  and based on clauses 4 to 7 all cash legacies and chattels pass to the various named individuals IHT free, no doubt intending these to have the 1st claim on the nil rate band.

Turning to the Property Fund at clause 8. 

Clause 8.1 ( the preamble)  clearly states the Property Fund is gifted subject to   '... any Inheritance Tax due in respect of the gift' 

There is no ambiguity here, the Property Fund ( as distinct from the property itself) bears the burden of the Inheritance Tax due on it. So I see no cause for any dispute on that point.

Crucially the Life Tenant has not been granted any right of occupation of the property itself merely a right to income from the Property Fund ( clause 8.4).  There is nothing in clause 8 or any of its sub clauses, which justifies the Life Tenant's contention that he has a lifetime right of property occupation, the usual clauses to thar effect are conspicuous by their absence. He needs to be disabused in strong terms of that supposition.

If I have any criticism at all of the drafting it is that the solicitors did not spell out in clear terms that the property must be sold to create the Property Fund',  thereby raising  cash for the associated IHT payable and then investing the net capital to produce the income.

I don't think that omission is fatal, since Clause 11 incorporates all of the Standard and special provisions of the Society of Trust and Estate Practitioners ( 3rd Edition).  -  see link below

https://www.step.org/system/files/media/files/2023-10/STEP_SSP3_2023.pdf

So  all this being reasonably clear the fly in the ointment appears to be the Life Tenant and the ill informed individual who has been giving him entirely false advice. I suspect that is the reason the original law firm has walked away, they do not want to get into a head to head confrontation with the Life Tenant.

This is a problem since the Life Tenant together with his legal aide cannot be trusted to administer the estate correctly, sell the property and assist in running the trust thereafter. 

Sadly this looks as if it is becoming or already become a contentious estate/trust matter if the Life Tenant refuses to see sense. 

You will need a STEP qualified lawyer to intervene and try to convince the Life Tenant that he is in the wrong and the property must be sold for the Property Fund to be established after IHT settled. If sense does not prevail this could end up in the courts, with high legal costs incurred to no one's benefit.

Going forward, there is the question of trusteeship. The Aunt wanted professional trustees, and in this case only an objective  professional would appear to be suitable, given the Life Tenant's demeanour. So even assuming an accord can be reached with the Life Tenant, professional fees will be incurred in running the trust.

Legal costs are a charge on the estate assets, but at this stage it appears the cash legacies would bear the brunt of such costs until the property is sold.

One last point, which might rein in the Life Tenant. Clause 2 states if any beneficiary disputes the validity of the will or makes any claim against the estate, their entitlement will be forfeit  and fall into residue. This could be the ' big stick'  needed here.

All in all a sad  outcome to what appears to be careful planning and good intentions by your son's Aunt.

GillyB26

poseidon1 said:

OP, firstly  I will apologise for maligning the solicitors by jumping to conclusions based on your misunderstanding of the all important  ' Property Fund ' clause.

From my perspective the will is a reasonably well crafted document outlining in acute detail your son's Aunt's testamentary wishes. That said, there  is an omission mentioned below which could have avoided the current angst..

As you surmised  and based on clauses 4 to 7 all cash legacies and chattels pass to the various named individuals IHT free, no doubt intending these to have the 1st claim on the nil rate band.

Turning to the Property Fund at clause 8. 

Clause 8.1 ( the preamble)  clearly states the Property Fund is gifted subject to   '... any Inheritance Tax due in respect of the gift' 

There is no ambiguity here, the Property Fund ( as distinct from the property itself) bears the burden of the Inheritance Tax due on it. So I see no cause for any dispute on that point.

Crucially the Life Tenant has not been granted any right of occupation of the property itself merely a right to income from the Property Fund ( clause 8.4).  There is nothing in clause 8 or any of its sub clauses, which justifies the Life Tenant's contention that he has a lifetime right of property occupation, the usual clauses to thar effect are conspicuous by their absence. He needs to be disabused in strong terms of that supposition.

If I have any criticism at all of the drafting it is that the solicitors did not spell out in clear terms that the property must be sold to create the Property Fund',  thereby raising  cash for the associated IHT payable and then investing the net capital to produce the income.

I don't think that omission is fatal, since Clause 11 incorporates all of the Standard and special provisions of the Society of Trust and Estate Practitioners ( 3rd Edition).  -  see link below

https://www.step.org/system/files/media/files/2023-10/STEP_SSP3_2023.pdf

So  all this being reasonably clear the fly in the ointment appears to be the Life Tenant and the ill informed individual who has been giving him entirely false advice. I suspect that is the reason the original law firm has walked away, they do not want to get into a head to head confrontation with the Life Tenant.

This is a problem since the Life Tenant together with his legal aide cannot be trusted to administer the estate correctly, sell the property and assist in running the trust thereafter. 

Sadly this looks as if it is becoming or already become a contentious estate/trust matter if the Life Tenant refuses to see sense. 

You will need a STEP qualified lawyer to intervene and try to convince the Life Tenant that he is in the wrong and the property must be sold for the Property Fund to be established after IHT settled. If sense does not prevail this could end up in the courts, with high legal costs incurred to no one's benefit.

Going forward, there is the question of trusteeship. The Aunt wanted professional trustees, and in this case only an objective  professional would appear to be suitable, given the Life Tenant's demeanour. So even assuming an accord can be reached with the Life Tenant, professional fees will be incurred in running the trust.

Legal costs are a charge on the estate assets, but at this stage it appears the cash legacies would bear the brunt of such costs until the property is sold.

One last point, which might rein in the Life Tenant. Clause 2 states if any beneficiary disputes the validity of the will or makes any claim against the estate, their entitlement will be forfeit  and fall into residue. This could be the ' big stick'  needed here.

All in all a sad  outcome to what appears to be careful planning and good intentions by your son's Aunt.

That's very interesting thank you, but has raised more questions. If the partner has not been given right of tenancy should he even be living in the house? (Changing the locks and using the address as his business address I may add) What about paying for upkeep of the property, bills etc? It seems from what I have heard from my father in law that the will is completely at odds to what the deceased wanted as she was always adamant herself that the house must not be sold.

I have searched for STEP lawyers locally and the Solicitor dealing with the will on my behalf is one of only 4 STEP Solicitors in our area so I think I maybhave inadvertently chosen well. I think I will ask her to represent my Son going forward, so far she has only been offering advice for free. 

Back to my original question though who will be liable for the IHT? Now, you have read the will in it's entirety does that still fall on the partner? 

Keep_pedalling

GillyB26 said:

poseidon1 said:

OP, firstly  I will apologise for maligning the solicitors by jumping to conclusions based on your misunderstanding of the all important  ' Property Fund ' clause.

From my perspective the will is a reasonably well crafted document outlining in acute detail your son's Aunt's testamentary wishes. That said, there  is an omission mentioned below which could have avoided the current angst..

As you surmised  and based on clauses 4 to 7 all cash legacies and chattels pass to the various named individuals IHT free, no doubt intending these to have the 1st claim on the nil rate band.

Turning to the Property Fund at clause 8. 

Clause 8.1 ( the preamble)  clearly states the Property Fund is gifted subject to   '... any Inheritance Tax due in respect of the gift' 

There is no ambiguity here, the Property Fund ( as distinct from the property itself) bears the burden of the Inheritance Tax due on it. So I see no cause for any dispute on that point.

Crucially the Life Tenant has not been granted any right of occupation of the property itself merely a right to income from the Property Fund ( clause 8.4).  There is nothing in clause 8 or any of its sub clauses, which justifies the Life Tenant's contention that he has a lifetime right of property occupation, the usual clauses to thar effect are conspicuous by their absence. He needs to be disabused in strong terms of that supposition.

If I have any criticism at all of the drafting it is that the solicitors did not spell out in clear terms that the property must be sold to create the Property Fund',  thereby raising  cash for the associated IHT payable and then investing the net capital to produce the income.

I don't think that omission is fatal, since Clause 11 incorporates all of the Standard and special provisions of the Society of Trust and Estate Practitioners ( 3rd Edition).  -  see link below

https://www.step.org/system/files/media/files/2023-10/STEP_SSP3_2023.pdf

So  all this being reasonably clear the fly in the ointment appears to be the Life Tenant and the ill informed individual who has been giving him entirely false advice. I suspect that is the reason the original law firm has walked away, they do not want to get into a head to head confrontation with the Life Tenant.

This is a problem since the Life Tenant together with his legal aide cannot be trusted to administer the estate correctly, sell the property and assist in running the trust thereafter. 

Sadly this looks as if it is becoming or already become a contentious estate/trust matter if the Life Tenant refuses to see sense. 

You will need a STEP qualified lawyer to intervene and try to convince the Life Tenant that he is in the wrong and the property must be sold for the Property Fund to be established after IHT settled. If sense does not prevail this could end up in the courts, with high legal costs incurred to no one's benefit.

Going forward, there is the question of trusteeship. The Aunt wanted professional trustees, and in this case only an objective  professional would appear to be suitable, given the Life Tenant's demeanour. So even assuming an accord can be reached with the Life Tenant, professional fees will be incurred in running the trust.

Legal costs are a charge on the estate assets, but at this stage it appears the cash legacies would bear the brunt of such costs until the property is sold.

One last point, which might rein in the Life Tenant. Clause 2 states if any beneficiary disputes the validity of the will or makes any claim against the estate, their entitlement will be forfeit  and fall into residue. This could be the ' big stick'  needed here.

All in all a sad  outcome to what appears to be careful planning and good intentions by your son's Aunt.

That's very interesting thank you, but has raised more questions. If the partner has not been given right of tenancy should he even be living in the house? (Changing the locks and using the address as his business address I may add) What about paying for upkeep of the property, bills etc? It seems from what I have heard from my father in law that the will is completely at odds to what the deceased wanted as she was always adamant herself that the house must not be sold. 

If that was made clear to the solicitors then they are very remiss in not pointing out that it would not be possible to avoid that. It is not easy to evict someone and it will have to be done by the book and may end up involving the courts.  The occupant is responsible for paying council tax and should be paying all utility bills. Have the council and utility companies been informed of her death?

I have searched for STEP lawyers locally and the Solicitor dealing with the will on my behalf is one of only 4 STEP Solicitors in our area so I think I maybhave inadvertently chosen well. I think I will ask her to represent my Son going forward, so far she has only been offering advice for free. 

Back to my original question though who will be liable for the IHT? Now, you have read the will in its entirety does that still fall on the partner? 

Because it is highly unlikely that it will be possible to pay the IHT within the required 6 months, then the administration can opt to pay by instalments so only £6k would be needed for the first payment this could come out of the liquid assets initially so nothing can be distributed until the house situation is resolved. 

GillyB26

Keep_pedalling said:

GillyB26 said:

poseidon1 said:

OP, firstly  I will apologise for maligning the solicitors by jumping to conclusions based on your misunderstanding of the all important  ' Property Fund ' clause.

From my perspective the will is a reasonably well crafted document outlining in acute detail your son's Aunt's testamentary wishes. That said, there  is an omission mentioned below which could have avoided the current angst..

As you surmised  and based on clauses 4 to 7 all cash legacies and chattels pass to the various named individuals IHT free, no doubt intending these to have the 1st claim on the nil rate band.

Turning to the Property Fund at clause 8. 

Clause 8.1 ( the preamble)  clearly states the Property Fund is gifted subject to   '... any Inheritance Tax due in respect of the gift' 

There is no ambiguity here, the Property Fund ( as distinct from the property itself) bears the burden of the Inheritance Tax due on it. So I see no cause for any dispute on that point.

Crucially the Life Tenant has not been granted any right of occupation of the property itself merely a right to income from the Property Fund ( clause 8.4).  There is nothing in clause 8 or any of its sub clauses, which justifies the Life Tenant's contention that he has a lifetime right of property occupation, the usual clauses to thar effect are conspicuous by their absence. He needs to be disabused in strong terms of that supposition.

If I have any criticism at all of the drafting it is that the solicitors did not spell out in clear terms that the property must be sold to create the Property Fund',  thereby raising  cash for the associated IHT payable and then investing the net capital to produce the income.

I don't think that omission is fatal, since Clause 11 incorporates all of the Standard and special provisions of the Society of Trust and Estate Practitioners ( 3rd Edition).  -  see link below

https://www.step.org/system/files/media/files/2023-10/STEP_SSP3_2023.pdf

So  all this being reasonably clear the fly in the ointment appears to be the Life Tenant and the ill informed individual who has been giving him entirely false advice. I suspect that is the reason the original law firm has walked away, they do not want to get into a head to head confrontation with the Life Tenant.

This is a problem since the Life Tenant together with his legal aide cannot be trusted to administer the estate correctly, sell the property and assist in running the trust thereafter. 

Sadly this looks as if it is becoming or already become a contentious estate/trust matter if the Life Tenant refuses to see sense. 

You will need a STEP qualified lawyer to intervene and try to convince the Life Tenant that he is in the wrong and the property must be sold for the Property Fund to be established after IHT settled. If sense does not prevail this could end up in the courts, with high legal costs incurred to no one's benefit.

Going forward, there is the question of trusteeship. The Aunt wanted professional trustees, and in this case only an objective  professional would appear to be suitable, given the Life Tenant's demeanour. So even assuming an accord can be reached with the Life Tenant, professional fees will be incurred in running the trust.

Legal costs are a charge on the estate assets, but at this stage it appears the cash legacies would bear the brunt of such costs until the property is sold.

One last point, which might rein in the Life Tenant. Clause 2 states if any beneficiary disputes the validity of the will or makes any claim against the estate, their entitlement will be forfeit  and fall into residue. This could be the ' big stick'  needed here.

All in all a sad  outcome to what appears to be careful planning and good intentions by your son's Aunt.

That's very interesting thank you, but has raised more questions. If the partner has not been given right of tenancy should he even be living in the house? (Changing the locks and using the address as his business address I may add) What about paying for upkeep of the property, bills etc? It seems from what I have heard from my father in law that the will is completely at odds to what the deceased wanted as she was always adamant herself that the house must not be sold. 

If that was made clear to the solicitors then they are very remiss in not pointing out that it would not be possible to avoid that. It is not easy to evict someone and it will have to be done by the book and may end up involving the courts.  The occupant is responsible for paying council tax and should be paying all utility bills. Have the council and utility companies been informed of her death?

I have searched for STEP lawyers locally and the Solicitor dealing with the will on my behalf is one of only 4 STEP Solicitors in our area so I think I maybhave inadvertently chosen well. I think I will ask her to represent my Son going forward, so far she has only been offering advice for free. 

Back to my original question though who will be liable for the IHT? Now, you have read the will in its entirety does that still fall on the partner? 

Because it is highly unlikely that it will be possible to pay the IHT within the required 6 months, then the administration can opt to pay by instalments so only £6k would be needed for the first payment this could come out of the liquid assets initially so nothing can be distributed until the house situation is resolved. 

As far as I am aware the partner has been paying the utility bills and pretty much supporting the deceased financially for the last ten or so years since the Deceased had to stop working due to illness. I'm not sure if that includes Council tax or anything else fir that matter. I know we were discussing house insurance yesterday and the policy is still in the deceased's name as her Partner was told that would be ok until it need renewing, I don't think it is though.  I know he has completed the portal to tell DWP about the deceased passing but I'm not sure who that notifies

I feel a bit sorry for the partner really, he seems to have been "screwed over" slightly.

Keep_pedalling

GillyB26 said:

Keep_pedalling said:

GillyB26 said:

poseidon1 said:

OP, firstly  I will apologise for maligning the solicitors by jumping to conclusions based on your misunderstanding of the all important  ' Property Fund ' clause.

From my perspective the will is a reasonably well crafted document outlining in acute detail your son's Aunt's testamentary wishes. That said, there  is an omission mentioned below which could have avoided the current angst..

As you surmised  and based on clauses 4 to 7 all cash legacies and chattels pass to the various named individuals IHT free, no doubt intending these to have the 1st claim on the nil rate band.

Turning to the Property Fund at clause 8. 

Clause 8.1 ( the preamble)  clearly states the Property Fund is gifted subject to   '... any Inheritance Tax due in respect of the gift' 

There is no ambiguity here, the Property Fund ( as distinct from the property itself) bears the burden of the Inheritance Tax due on it. So I see no cause for any dispute on that point.

Crucially the Life Tenant has not been granted any right of occupation of the property itself merely a right to income from the Property Fund ( clause 8.4).  There is nothing in clause 8 or any of its sub clauses, which justifies the Life Tenant's contention that he has a lifetime right of property occupation, the usual clauses to thar effect are conspicuous by their absence. He needs to be disabused in strong terms of that supposition.

If I have any criticism at all of the drafting it is that the solicitors did not spell out in clear terms that the property must be sold to create the Property Fund',  thereby raising  cash for the associated IHT payable and then investing the net capital to produce the income.

I don't think that omission is fatal, since Clause 11 incorporates all of the Standard and special provisions of the Society of Trust and Estate Practitioners ( 3rd Edition).  -  see link below

https://www.step.org/system/files/media/files/2023-10/STEP_SSP3_2023.pdf

So  all this being reasonably clear the fly in the ointment appears to be the Life Tenant and the ill informed individual who has been giving him entirely false advice. I suspect that is the reason the original law firm has walked away, they do not want to get into a head to head confrontation with the Life Tenant.

This is a problem since the Life Tenant together with his legal aide cannot be trusted to administer the estate correctly, sell the property and assist in running the trust thereafter. 

Sadly this looks as if it is becoming or already become a contentious estate/trust matter if the Life Tenant refuses to see sense. 

You will need a STEP qualified lawyer to intervene and try to convince the Life Tenant that he is in the wrong and the property must be sold for the Property Fund to be established after IHT settled. If sense does not prevail this could end up in the courts, with high legal costs incurred to no one's benefit.

Going forward, there is the question of trusteeship. The Aunt wanted professional trustees, and in this case only an objective  professional would appear to be suitable, given the Life Tenant's demeanour. So even assuming an accord can be reached with the Life Tenant, professional fees will be incurred in running the trust.

Legal costs are a charge on the estate assets, but at this stage it appears the cash legacies would bear the brunt of such costs until the property is sold.

One last point, which might rein in the Life Tenant. Clause 2 states if any beneficiary disputes the validity of the will or makes any claim against the estate, their entitlement will be forfeit  and fall into residue. This could be the ' big stick'  needed here.

All in all a sad  outcome to what appears to be careful planning and good intentions by your son's Aunt.

That's very interesting thank you, but has raised more questions. If the partner has not been given right of tenancy should he even be living in the house? (Changing the locks and using the address as his business address I may add) What about paying for upkeep of the property, bills etc? It seems from what I have heard from my father in law that the will is completely at odds to what the deceased wanted as she was always adamant herself that the house must not be sold. 

If that was made clear to the solicitors then they are very remiss in not pointing out that it would not be possible to avoid that. It is not easy to evict someone and it will have to be done by the book and may end up involving the courts.  The occupant is responsible for paying council tax and should be paying all utility bills. Have the council and utility companies been informed of her death?

I have searched for STEP lawyers locally and the Solicitor dealing with the will on my behalf is one of only 4 STEP Solicitors in our area so I think I maybhave inadvertently chosen well. I think I will ask her to represent my Son going forward, so far she has only been offering advice for free. 

Back to my original question though who will be liable for the IHT? Now, you have read the will in its entirety does that still fall on the partner? 

Because it is highly unlikely that it will be possible to pay the IHT within the required 6 months, then the administration can opt to pay by instalments so only £6k would be needed for the first payment this could come out of the liquid assets initially so nothing can be distributed until the house situation is resolved. 

As far as I am aware the partner has been paying the utility bills and pretty much supporting the deceased financially for the last ten or so years since the Deceased had to stop working due to illness. I'm not sure if that includes Council tax or anything else fir that matter. I know we were discussing house insurance yesterday and the policy is still in the deceased's name as her Partner was told that would be ok until it need renewing, I don't think it is though.  I know he has completed the portal to tell DWP about the deceased passing but I'm not sure who that notifies

I feel a bit sorry for the partner really, he seems to have been "screwed over" slightly.

It is very sad, all they needed to do was spend about £70 on becoming civil partners and there would be no IHT liability as the house would been covered by spousal exemption. From what you say it sounds like he has built up a claimable beneficial interest in the property as well.

I think the best solution, if at all possible, would be to try and come to some amicable arrangement where the house is sold and the trust buys a smaller place for him to occupy rather than burning up a large chunk of the estate on legal costs. 

poseidon1

GillyB26 said:

poseidon1 said:

OP, firstly  I will apologise for maligning the solicitors by jumping to conclusions based on your misunderstanding of the all important  ' Property Fund ' clause.

From my perspective the will is a reasonably well crafted document outlining in acute detail your son's Aunt's testamentary wishes. That said, there  is an omission mentioned below which could have avoided the current angst..

As you surmised  and based on clauses 4 to 7 all cash legacies and chattels pass to the various named individuals IHT free, no doubt intending these to have the 1st claim on the nil rate band.

Turning to the Property Fund at clause 8. 

Clause 8.1 ( the preamble)  clearly states the Property Fund is gifted subject to   '... any Inheritance Tax due in respect of the gift' 

There is no ambiguity here, the Property Fund ( as distinct from the property itself) bears the burden of the Inheritance Tax due on it. So I see no cause for any dispute on that point.

Crucially the Life Tenant has not been granted any right of occupation of the property itself merely a right to income from the Property Fund ( clause 8.4).  There is nothing in clause 8 or any of its sub clauses, which justifies the Life Tenant's contention that he has a lifetime right of property occupation, the usual clauses to thar effect are conspicuous by their absence. He needs to be disabused in strong terms of that supposition.

If I have any criticism at all of the drafting it is that the solicitors did not spell out in clear terms that the property must be sold to create the Property Fund',  thereby raising  cash for the associated IHT payable and then investing the net capital to produce the income.

I don't think that omission is fatal, since Clause 11 incorporates all of the Standard and special provisions of the Society of Trust and Estate Practitioners ( 3rd Edition).  -  see link below

https://www.step.org/system/files/media/files/2023-10/STEP_SSP3_2023.pdf

So  all this being reasonably clear the fly in the ointment appears to be the Life Tenant and the ill informed individual who has been giving him entirely false advice. I suspect that is the reason the original law firm has walked away, they do not want to get into a head to head confrontation with the Life Tenant.

This is a problem since the Life Tenant together with his legal aide cannot be trusted to administer the estate correctly, sell the property and assist in running the trust thereafter. 

Sadly this looks as if it is becoming or already become a contentious estate/trust matter if the Life Tenant refuses to see sense. 

You will need a STEP qualified lawyer to intervene and try to convince the Life Tenant that he is in the wrong and the property must be sold for the Property Fund to be established after IHT settled. If sense does not prevail this could end up in the courts, with high legal costs incurred to no one's benefit.

Going forward, there is the question of trusteeship. The Aunt wanted professional trustees, and in this case only an objective  professional would appear to be suitable, given the Life Tenant's demeanour. So even assuming an accord can be reached with the Life Tenant, professional fees will be incurred in running the trust.

Legal costs are a charge on the estate assets, but at this stage it appears the cash legacies would bear the brunt of such costs until the property is sold.

One last point, which might rein in the Life Tenant. Clause 2 states if any beneficiary disputes the validity of the will or makes any claim against the estate, their entitlement will be forfeit  and fall into residue. This could be the ' big stick'  needed here.

All in all a sad  outcome to what appears to be careful planning and good intentions by your son's Aunt.

That's very interesting thank you, but has raised more questions. If the partner has not been given right of tenancy should he even be living in the house? (Changing the locks and using the address as his business address I may add) What about paying for upkeep of the property, bills etc? It seems from what I have heard from my father in law that the will is completely at odds to what the deceased wanted as she was always adamant herself that the house must not be sold.

I have searched for STEP lawyers locally and the Solicitor dealing with the will on my behalf is one of only 4 STEP Solicitors in our area so I think I maybhave inadvertently chosen well. I think I will ask her to represent my Son going forward, so far she has only been offering advice for free. 

Back to my original question though who will be liable for the IHT? Now, you have read the will in it's entirety does that still fall on the partner? 

I can only work with the express wording of the will which is clear that the ' Property Fund' bears its own tax.
The Property Fund can only relate to the property the Life Tenant is living in so there can be no question at all of any IHT liabilty relating to it falling on your son in any way, in that regard the adviser to the Life Tenant has made an obviously false and distressing ( to you) statement. Your son has no vested entitlement to the property, or to an investment fund representing the same until death of the Life Tenant.

As to costs of maintaining the property prior to the Property Fund being established, that would normally fall on the estate until sale. However, as previously indicated that could mean exhausting the cash currently earmarked for legacies until such time the legacies can be met from the property sale proceeds. In the interim it could have been open to the trustees to offer the Life Tenant rent free occupation of the property ( pre sale) in exchange for his covering the routine outgoings. Clearly that is an arrangement the Life Tenant is resisting.

I note in this regard that the Life Tenant has a business in Tunisa which implies he also has a home there. Selling the UK home therefore would not appear to  render him homeless, which would have  been a reasonable basis for him to claim an enforceable right to occupy the property although even that is countered by clause 2 of the Will.

If as you say, the Aunt made statements  during her lifetime related to retaining the property after her death, then that is entirely contradicted by the Will. The will has to be the last word on that subject.

As indicated by Keep_pedalling, IHT could have been potentially avoided had the parties been married prior to her death.

Having said this, the full spousal exemption might not have been in point, if the partner is a non UK born Non Dom ( the  UK IHT rules do discriminate against Non Dom spouses), but even on the revised limits of Nil Rate Band plus a further £325k special Non Dom Spouse relief, a total of £650k would have sufficed to take the estate out of IHT charge.

Fortunately you have retained a STEP qualified lawyer,  so the only hope for a workable ( if not exactly amicable) outcome  is for the Life Tenant to accept the property has to be sold to give affect to the stated terms of the will as well as settle the IHT due thereon. He then goes on to benefit from the income for life from the net trust fund remaining.

Right now there is a vacuum with regard to executorship/trusteeship. That needs to be addressed ASAP, and preferable by a professional rather than the beneficiaries, none of whom appear to be qualified for the role.