Will and trust query

Britannia12345

I don't know if anyone can advise me on here but here goes: 

A couple of years ago my parents arranged with their solicitor to set up a trust for myself and my children in the event of their deaths.

I'm sole carer for my severely disabled husband and so am living on means tested benefits. My parents set up the trust so that either myself or my children could benefit from the will. 

Fast forward to now. My parents are deceased and my brother has sold their home and is ready to send my share of the house to me. I told him it has to go into the trust that was set up and he knew nothing about it. I asked my parents solicitor and he said he couldn't advise me about anything but there is no trust in the will, just a note saying that my brother is to receive his share and my share is to be put into a trust. The solicitor says it is up to my brother and myself to set up the trust and manage it. My parents paid the solicitor to set up a trust but now I find out there's nothing there. 

My brother has been totally unreasonable towards me since their deaths and a lot of bad blood has surfaced between us. Too long and boring to go into here, but I definitely do not want him in charge of a trust, deciding what can happen to mine and my childrens'  inheritance. 

I contacted a few solicitors before Christmas to ask for advice but didn't get very far. Two of them asked for a copy of the will and then I never heard from them again. The last one I spoke to said he'd look at it in the New Year and tell me if it's feasible to remove my brother. He's just contacted me to say he's ready to advise me but it will cost £350 + vat +disbursements. 

Is this a reasonable sum? I've only ever used a solicitor for conveyancing before. 

If this is reasonable would it be sensible to go ahead and ask the solicitor to remove my brother and appoint his firm as trustees? 

Does my brother even need removing if there isn't actually a trust in place at the moment? 

Part of me is so close to just telling him to send me the money directly but then I'll obviously live off that money until it runs out and my children won't receive anything. 

By the time I've set up and paid for a discretionary trust will there be much left for them when I'm dead and gone? 

So many questions I know but my head is spinning with it all and the very people I would have run to for help and advice are no longer with me. 

Keep_pedalling

It is unlikely that any trust existed before the death of your parents and more likely that the will would create a trust on the second death. Can you give us the full wording of the clause that refers to this trust? (Redact any personal info). 

poseidon1

Britannia12345 said:

I don't know if anyone can advise me on here but here goes: 

A couple of years ago my parents arranged with their solicitor to set up a trust for myself and my children in the event of their deaths.

I'm sole carer for my severely disabled husband and so am living on means tested benefits. My parents set up the trust so that either myself or my children could benefit from the will. 

Fast forward to now. My parents are deceased and my brother has sold their home and is ready to send my share of the house to me. I told him it has to go into the trust that was set up and he knew nothing about it. I asked my parents solicitor and he said he couldn't advise me about anything but there is no trust in the will, just a note saying that my brother is to receive his share and my share is to be put into a trust. The solicitor says it is up to my brother and myself to set up the trust and manage it. My parents paid the solicitor to set up a trust but now I find out there's nothing there. 

My brother has been totally unreasonable towards me since their deaths and a lot of bad blood has surfaced between us. Too long and boring to go into here, but I definitely do not want him in charge of a trust, deciding what can happen to mine and my childrens'  inheritance. 

I contacted a few solicitors before Christmas to ask for advice but didn't get very far. Two of them asked for a copy of the will and then I never heard from them again. The last one I spoke to said he'd look at it in the New Year and tell me if it's feasible to remove my brother. He's just contacted me to say he's ready to advise me but it will cost £350 + vat +disbursements. 

Is this a reasonable sum? I've only ever used a solicitor for conveyancing before. 

If this is reasonable would it be sensible to go ahead and ask the solicitor to remove my brother and appoint his firm as trustees? 

Does my brother even need removing if there isn't actually a trust in place at the moment? 

Part of me is so close to just telling him to send me the money directly but then I'll obviously live off that money until it runs out and my children won't receive anything. 

By the time I've set up and paid for a discretionary trust will there be much left for them when I'm dead and gone? 

So many questions I know but my head is spinning with it all and the very people I would have run to for help and advice are no longer with me. 

Searching through your old posts this discretionary trust idea arose and was discussed below - 

https://forums.moneysavingexpert.com/discussion/5886498/discretionary-trusts#latest

As indicated in thread above, your father's original intention was to establish a trust for you and your children as an integral part of his will. This would mean all the terms and conditions of the trust would be set out ( in detail ) in the actual will itself rather than a separate standalone document.

Couple of questions to you therefore:

1) The Will was first discussed in 2018, when did your father actually execute his will (year)?

2) You say the will itself has no mention of detailed discretionary trust terms, just a ' note' directing your share be held in trust. What do you mean by 'note'?  Please provide the verbatim wording of the clause of you father's Will dealing with your share of the estate, the word 'note' is meaningless in this regard.

I would point out I am familiar with standalone trusts established to receive funds from a deceased Will. These are colloquially called Pilot Trusts as discussed in the article below.

https://www.taxinsider.co.uk/pilot-trusts-what-are-they

Key point to understand is such trusts are created and dated by the settlor before his Will is executed (usually with a nominal £10 note).  The Will then goes on to recite that assets/funds are held subject to that trust and provides the date the trust was executed so that there is no ambiguity (in the Will) on that point. The pilot trust document is then held in safekeeping together with Will.

From you have said so far, none of the process above appears to have been implemented. Therefore subject to your clarification of the exact Will wording, it seems to me the trust directive intended by your father has failed.

If that be the case there is no point you trying to implement one retrospectively,  since you would have to execute a deed of variation varying your now absolute estate entitlement, into a trust of your own creation. Although such a trust remains effective for IHT purposes ( ie your father is the deemed settlor), you become the defacto settlor of the trust for income tax purposes ( ie all trust income directly taxable on you).

As to the professional you should be consulting, as mentioned by respondents in the 2018 thread only solicitors holding the STEP qualification ( Society of Trust and Estate Practitioners) should be consulted on complex trust and estate planning matters. Given the debacle with your father's Will, my guess is that solicitor was not a STEP member.

As for the solicitor that quoted £350 plus vat to look into this for you, the amount does not suggest to me an experienced STEP qualified lawyer ( too cheap). The others who chose not to engage with you, were probably wisely  aware of their own limitations.

Finally, in my considered view the expense and complexity of administering discretionary trusts are such that you should not be considering  this  option unless the trust fund is well north of £325,000 in value. However at that value, you then introduce additional 10 yearly IHT compliance and potential IHT at 6% at each 10th anniversary. 

Britannia12345

i asked my parents to find a step solicitor in their area but i think they went with their family solicitor in the end. 

This is what's written in the will....

Britannia12345

This is what my parents solicitor said when I asked him about it 

 XXXXXXX drafted the Will, however we are not instructed to act in the estate. We have put the provisions in place for the Trust to be administered however it is outside of our control as to whether these provisions are followed. To clarify, XXXXXXX have not established a Trust account or registered the Trust for HMRC as this would be a job for the Trustees of the Will. We put the Trust provisions in place in the Will and it is then a matter for the Trustees of the Will to open a Trustee account and manage the finances themselves. I believe I mentioned before that the Trust in the Will is a discretionary Trust, as per clause 7.1.2 of the Will the Trustees do have authority to fully distribute the Trust as they see fit.

Keep_pedalling

From what you have posted it seems the trust referenced in the will was never set up so that bequest would seem to have failed. If that is the case then that bequest falls back into the estate for the benefit of the residual beneficiaries (presumable you and your brother)

In that 2018 thread I suggested that rather than using a trust you could use your inheritance to purchase a property instead of continue to rent, did you and your parents have any discussion on that idea.

Britannia12345

We ended up buying a house with money left to us in my uncle's will. 

poseidon1

Britannia12345 said:

i asked my parents to find a step solicitor in their area but i think they went with their family solicitor in the end. 

This is what's written in the will....

The clauses of the Will you have chosen to supply are very heavily redacted to an extent that it is not clear whether you have removed enabling trust provisions as well as beneficiaries' names.

However, on my reading of clause 7.1 your trust fund provides for your trust income to be paid to you as of right until the distribution date ( whenever that date is). Therefore until that date there is no discretion over who gets the trust income , it is yours as of right so to that extent there is no discretion over the application of the trust income. 

Clause 7.1.1.1 indicates the trust distribution date to be the death of the last survivor of you and.........?
Are the redacted names that of your children and/or your brother? Please confirm?

On what I can see of clause 7.1.1.1 you have a life interest in the trust income subject to you voluntarily surrendering the entitlement ( clause 7.1.1.2);  or trustees using their discretion to distribute trust capital to the named beneficiaries before your death ( clause 7.1.1.3). 

In any event my main takeaway of what I can see, this is not a full blown discretionary trust because of the apparent income right vested with you. To that extent I disagree with your parent's solicitor, the trust is only partly discretionary as far as powers over capital is concerned. By giving you the income right (rather than trustee discretion to pay income to whomever they deem fit) this is at best  a hybrid trust. Certainly these clauses are not what I would expect to see for a classic discretionary trust.

As to whether the trust exsists, if what you have supplied is an extract from your father's probated Will; probate has been obtained and your 50% of trust residue has now been ascertained; then the trust does exsist and I assume your brother ( as sole executor/trustee?) currently holds your trust fund in a trustee capacity.

Going forward, if you do not want your brother to remain as trustee, he needs to retire ( by deed) and you choose a replacement ( assuming the Will gives you that power - but not clear from the little supplied). The trust, if allowed to continue and not terminated early will need to be registered with HMRC ( there are penalties for failing to do so). The trust will be a taxable entity with any trust income arising in your favour liable to basic rate tax, reportable by the trustees on a trust tax return.

It is imperative you consult a STEP qualified lawyer ASAP to explain to you what your father's lawyer has created here, and what options are open to you going forward.

If the lawyer you are hoping to see is not STEP qualified, that meeting could prove a waste of time, or worse still, they intermeddle in a matter they are not qualified to handle.

Finally, given that the whole point of this trust seems to haven been preservation of your benefits, you would be best advised to read the article below from a leading wealth manager who also runs a significant family trust administration business: 

https://www.rathbones.com/en-gb/wealth-management/knowledge-and-insight/universal-credit-and-trusts-important-changes

Britannia12345

Thankyou, that's very interesting 👍