Changing the share of a property left in a will trust

dummydaydream

Grateful for any insight.

My parents owned their house as tenants in common and wrote wills 12 years ago that created a will trust on death and left each other a life interest in the other’s half and then the house would be left equally to their 3 children and 4 grandchildren. My dad has now passed away and mum has been in a care home for 2 years. She has inherited his residuary estate. We expect Mum to be now considered as self funding for her care as she owns half an empty house. We will probably have to sell the house, which means Dad’s half will be distributed according to his will.

My concern is that my children will now be considered as home owners and won’t benefit from any perks for first time buyers or be able to use the bonus in their LISA. Is it possible to vary the terms of the will so that I inherit their share and then compensate them for the amount they would have inherited. There will be no problem everyone agreeing to this.

Can I also ask if we need to inform HMRC about this trust that has been created on dad’s death.

Thanks for any advice.

Annemos

Good evening

I am not an expert and so cannot advise you for your particular case.

But I came across this Form recently.

It is HMRC Form IOV2 which makes one go through several questions, to see if the Deed of Variation meets the correct requirements to be successful. "Instrument of Variation Checklist".

There are 11 questions and the notes for each question are also given.

https://assets.publishing.service.gov.uk/media/5a7df4d040f0b6230268838d/IOV2.pdf

Savvy_Sue

I suspect your offspring won't become home owners if you sell the house before mum's death, or after her death from the estate. But we'd need the redacted wording to be certain, and to know if the trust needs to be registered.

Keep_pedalling

To answer your question, no this does not make any of the beneficiaries house ownership, immediate post death interest trusts have to be registered within 2 years of the death, but in this case (depending on the exact wording of the will) the trust may not be created because of your mother’s situation.

Have you checked the wording of the will in detail. Often there is a clause that puts the proceeds of the deceased spouse’s share of the house sale in trust with the surviving spouse entitled to the income from the trust. If not then the executors and your mother (or her attorney / deputy) can sell the house and his estate distributed.

In either case no changes should be made with the land registry until it is sold then transferred to the buyers.

RAS

As K_p indicates, if dad's estate and mum sell the house there are no issues for the grandchildren. Do not transfer dad's portion to the beneficiaries before sale.

Please come back with the exact wording of the clause in the will that sets up the IPDI trust.

It may mean that when the house is sold, dad's half has to be invested to help mum during her life, or less often that it is distributed to his children and grandchildren after the sale. Can't tell without the exact wording.

dummydaydream

https://forums.moneysavingexpert.com/discussion/comment/81958306#Comment_81958306

Hi. Thanks. I think you’re right.

The ‘trust fund’ is Dad’s share of the property. Me and my 2 siblings are trustees. Mum is the Life Tenant and the Trust Period is the time between their 2 deaths

The wording is ‘the Property Trustees shall pay the income of the Trust Fund to the Life Tenant for the Trust Period’

How do we pay Mum income from Dad’s share of the house? Do we have to sell? I thought it was complicated but not this complicated. We’ll definitely take legal advice. Thanks again.

Keep_pedalling

Selling is you only real option unless you want the grand children to be property owners. Putting 50% of the proceeds into trust is not that complicated and is certainly a lot simpler than becoming land lords.

Does anyone have financial power of attorney for your mother? If not and she does not have the mental capacity to sell her home you are going to have to obtain deputyship for her.

On a separate issue with your mother becoming self funding you will be able to claim attendance allowance for her.

Mands

https://forums.moneysavingexpert.com/discussion/comment/81958336#Comment_81958336

Can you sell it?

Do you have a valid PoA? Or does she still have capacity?

poseidon1

Some points you should note.

You have stated your mother is entitled to the income of trust for the rest of her life. That imposes a trustee obligation to invest the trust fund towards that end. Assuming the trustees have no intention to become landlords then the property must be sold, to release the 50% proceeds for investment. Presumably with your mother in long term care a sale to release her personal half share would be required in any event?

The plus side of this trust is that none of the other beneficiaries have inherited anything as yet, and they certainly do not have any beneficial interest in the property ( that currently vests on behalf of your mother). This means your children's first time buyers status are wholly unaffected by the trust whilst your mother is alive and the trust remains intact.

As for HMRC compliance for the trust, the trust will need to be registered in due course, and potential tax returns submitted for income tax due on trust income once this commences - see below

https://www.gov.uk/guidance/register-a-trust-as-a-trustee

As for a deed of variation excercise to get rid of the trust, this is unlikely to be viable if it means depriving your mother of the underlying trust income stream. It would certainly run contrary to your father's express wish that your mother financially benefit from his share of the home.

If you are seeking legal advice on the way forward, hopefully the lawyer has appropriate competency in trust law and administration matters, many do not.

dummydaydream

Thanks for all the replies. We do have POA for Mum so hopefully quite straightforward for us to manage her affairs. I presume if we sell then there has to be a specialist trust account for the proceeds for Dad’s share and the income from that then goes to Mum and her share is kept separately in another account and is used in the financial assessment for her care.

One of the other grandchildren has expressed an interest in renting the property with a view to eventually buying it. This is the only renting scenario we would entertain but I presume that creates the problem for my children mentioned in my first post who do not want to be homeowners - mine are the youngest and still students. Also all the rental income would be Mum’s minus allowable deductions for maintenance etc. so seems like an ongoing financial headache.

We’re meeting as a family tomorrow so I’m glad I’ve got a better idea of what’s happening, even if it’s more complicated than we realised.

Keep_pedalling

I would not touch the renting solution with a very long bargepole. It really will complicate things greatly (your mother, and the trust, would effectively become a landlord and as trustees and her anttorneys you would be responsible for the tax returns for both) and certainly won’t bring in enough income to cover care costs. If you sell the property half the proceeds will need to go into a trust account. Bearing in mind this is likely to be for the short term then you would be looking at holding it all in cash.

I know that some NS&I products can be held in trust, but if we are talking about very large sums some professional help might be in order.