Keep discretionary will trust?

milleniumaire

My father-in-law died in May this year, leaving my mother-in-law living in their home. Their estate is currently worth around £1.3 million, including the house, so probably some IHT to pay when my mother-in-law departs and at 92 and frail, that may be sooner rather than later.

My brother-in-law hasn't yet started probate, as he has been too busy sorting his own personal issues, so my wife (his sister) has offered to help and I want to do the same.

Back in 2004 my mother and father-in-laws had new discretionary will trusts produced by a local solicitor, as did my wife and I.  This was done for IHT reasons and as part of the process, assets where equalised and the property was changed from Joint Tenants to Tenants in Kind.

The IHT reasons for doing this are no longer valid and I'm not aware of any other reason to keep the will trust in place.

So, for my father-in-law, I understand it is possible to use a deed of variation to modify the will after his death, to remove the will trust, potentially making things easier to administer.

Is this something that should be considered or is it too late?  If this did happen, should it be done before probate is started, since my understanding is that his assets under the will trust would go into the trust and would therefore be considered to be outside of the estate, whereas if the trust didn't exist, all his assets would be part of the estate (although I'm not sure about the house with it being tenant in common!

Thinking about the best way to handle my father-in-laws assets has made us think about our own will, which we were aware needed to be updated, but for the same reason, it feels like we should get rid of our will trust also as I'm not sure there is a benefit to having it and having a will trust potentially makes managing the estate more complicated and more expensive.

I would really appreciate some advice on the best way forward.  I want to understand the various scenarios a little more before discussing with our solicitor and with my brother-in-law.  I confess, I'm a little concerned that solicitors may still be advising the use of will trusts since it is beneficial to them!

Keep_pedalling

It’s not too late to make a DoV as you have 2 years from the date of death to make one of those. It is highly unlikely that the DT is fit for purpose any more and if all agree the simplest thing to do is to have your MIL to inherit everything outright. 

SiliconChip

I'm sure people who know about trusts will offer their thoughts, but the one thing I can say from reading threads on here is that you need to be dealing with a solicitor who is a member of STEP who has the necessary knowledge. If your current solictor isn't a member then you need to find one who is.

https://www.step.org/about-step/public

poseidon1

The primary problem with pre 2006 discretionary trusts is the definition of the beneficial class. Usually the class would not only include children of the deceased, their children (  the grandchildren) and as a backstop ' remoter issue' (children of the grandchildren and remoter unborns). 

The problem with such a wide beneficial class, is this complicates trying to the terminate the trust by way of simple DOV.

Put simply, although all adults with legal capacity can join in the DOV , minors and  unborn beneficiaries cannot. The equity courts would need to intervene on behalf of those beneficiaries to sanction signing away their rights, thereby requiring a potentially expensive application to a judge in chambers as explained in the technical briefing below


https://library.croneri.co.uk/cch_uk/ross/51-190#:~:text=This means that if an,two years of the death.&text=IHTA 1984, s.,144.

However,  as indicated in the article an alternative to this is for the trustees to excercise their discretionary powers to advance the trust fund to the widow within 2 years of death. Benefit of this route is the  restoration of the deceased's NRB for use by surviving spouse on her eventual  death.

It would have been better had the wills been  reviewed  and replaced after the introduction of transferable NRBs in 2007 to leave the respective estates to each other, but at least there is a workable solution.

Clearly if your own wills are similarly drafted, you should proceed to redraft and  new wills ASAP to avoid the issues that now arise for  your inlaws.

Hopefully as indicated by SiliconChip, you have access to a STEP qualified solicitor to consult  and guide you through these various matters.  I must stress discretionary trusts are complex entities requiring appropriately qualified practitioners.