Property trust query

savagelyric

Parents have mirror wills, their 50% share of their property is to go into trust upon death and all other assets to the surviving spouse with them being able to live in the house for the rest of their lifetime.

My dad died in March and the solicitor dealing with his estate (executors as well as my mum, sibling and myself) have suggested that my mum puts her 50% of the house into trust at the same time that they put my Dad's into trust.

Is there anywhere where I can read unbiased simple information on this in order to help my mum make the right decision? She is feeling overwhelmed at the moment. I've done a little reading and so far, it looks like this is unnecessary and can even complicate things if she wishes to move but I want to make sure I am taking all things into account.

Thank you.

Keep_pedalling

No, that would be an incredibly foolish thing to do. The trust your father’s will created is fine, but creating a separate trust for her share of the house only earns a fat fee for the solicitor for what is almost certainly a useless trust. It serves no purpose as regards saving tax (it is actually likely to increase any tax burden), and will be treated of deliberate deprivation of assets if your mother ever needs residential care. It will also make winding up her estate much harder for her executors.

It unfortunate your father appointed this solicitor as an executor because their advice is not in the best interest of your mother or her eventual beneficiaries, so deserves to be given the order of the boot. If your mother has also appointed this solicitor as one of her executors she really needs a revised will with just you and your sibling as executors. You should also avoid appointing them as trustees for the trust your father’s will has created.

savagelyric

Thanks for the quick reply and for the no nonsense answer!

I have collated and sent a list of questions for the solicitor requesting the benefit of doing this (a few days ago, before posting this) etc etc but they have not yet answered. The solicitor has also recommended updating of my mum's will so we'll bear in mind whether we should appoint them as executors.

Keep_pedalling

https://forums.moneysavingexpert.com/discussion/comment/82031621#Comment_82031621

Unless an estate is complex it is within the scope of most lay people to be able to wind up an estate without the use of solicitors. Apart from costs savings lay administrators can usually wind one up far quicker than a solicitor will take.

Does your mother have lasting powers of attorney in place? If not that should be something that should be done ASAP. The solicitor may also offer that service although it is not difficult to DIY.

savagelyric

Estate not complex (even the solicitor commented this) and we have both LPAs in place for my Mum.

You mentioned about avoiding the solicitors being trustees of my Dad's 50% property trust if possible, where can I find out about the what being a trustee involves please?

Keep_pedalling

https://forums.moneysavingexpert.com/discussion/comment/82031651#Comment_82031651

Your father’s will has created an immediate post death interest trust which is not one that involves much in the way of ongoing management. The trustees need to register the trust with HMRC within two years of your fathers death, but there is no ongoing administration burden involved unless your mother needs to sell up for alternative accommodation or at the point of her death at which point the trust is wound up along with her estate.

RAS

You do need to separate out the fact that executors hold the deceased's assets in trust until distribution and are referred to as trustees for the duration, and the Immediate Post Death Interest Trust that was created by your father's will.

The will sets out how the IPDI trust is to be run. Plainly this permits mum to live there, until some defined moment which may be her death? It should also explain how dad's portion is handled if she needs to sell to downsize or move into care. If you can quote the relevant sections minus names, there are several folk here who can explain the nuances.

The IPDI trust does need reporting to HMRC with 2 years, but that easy enough to do.

Assuming mum and dad owned as tenants in common, there will be a restriction that prevents either party selling without the other's consent. It's not necessary to amend the deeds but the "children" might want to amend the restriction so that notice has to be given to one or more of them as trustees of the IPDI trust. There have been odd instances of step parents or spouses trying to access the funds in the IPDI trust.

I'd be very wary of appointing the solicitor as a IPDI trustee.

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82031651#Comment_82031651

Trustees duties for 50% of house placed in trust will be fairly non exsistent.

They will often be registered as co legal owners of the property with the surviving spouse, with a restriction on title ( Form A restriction) preventing a sale or other dealings with the property unless all legal owners acting jointly. Paperwork involving that exercise can be done on a DIY basis for those who are reasonably capable and as pointed out by @Keep_pedalling is pretty much the extent of hands on trust work until the surviving spouses eventual death.

Pretty normal for children of the marriage to be trustees in this scenario, but definitely do not include a solicitor as co- trustee/owner. Unnecessary fees would result as well as hinder the family's decision making process. A further complication, is the number of solicitor firms going bust or shut down by the SRA each year. No gurantee a solicitor trustee can be easily accessed when needed, in that scenario.

Where the trusteeship become a little more complex, is where the trust also provides for the trust funds to be invested to produce income for the spouse, in circumstances where they are no longer able to live in the house. Does your father's will provide for this eventuality? Even if it does, most solicitors (if trustees) tend to offer no tangible assistance in that scenario.

Finally if you unaware of the horrendous damage a trust of the house created during a person's lifetime can wreak, the infamous ongoing case of the McClure Trusts should prompt you to be highly sceptical of any solicitor reccomending that course of action for a modest sized estates with little or no IHT expose.

The following articles below are well worth reading, and I would further add that a couple of executors of McClure Trust victims have posted in this forum seeking advice to help untangle the appalling mess arising after their parents death -

https://www.bbc.co.uk/news/uk-england-68070449

https://nash.co.uk/insights/lost-trust-with-mcclure-solicitors

https://news.stv.tv/scotland/thousands-stuck-in-legal-turmoil-after-collapse-of-mcclure-solicitors?utm_source=newsshowcase&utm_medium=discover&utm_campaign=CCwqGQgwKhAIACoHCAowk-f5CjCN3OYCMNyD9gMw0r-fBA&utm_content=bullets

Please note I have no axe to grind about trusts in general , but other than relatively simple IPDI trusts for surviving spouses, the vast majority of the general public with modest estates have absolutely no business getting involved with structures neither they nor their immediate families understand.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82031750#Comment_82031750

the vast majority of the general public with modest estates have absolutely no business getting involved with structures neither they nor their immediate families understand.

My understanding is that even the majority of those with larger than modest estates, are still best to avoid the complications of getting involved with trusts, unless they are seriously wealthy. Not sure where the level of wealth is where it maybe useful to get involved with trusts, and of course it will vary from person/household to another. Maybe about £3million + ?

savagelyric

Thanks everyone for sharing your knowledge.

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82032369#Comment_82032369

It will depend on how the wealth is distributed. Those in £2 million plus range but with at least half that in liquid or semi liquid assets might find trusts either during lifetime or on death as a viable tax planning propositions.

There is the entirely separate and growing category of blended families where the parents each have children from previous relationships. Even where IHT is not an issue, IPDI trusts maybe the only option to ensure children of a prior relationship are not disinherited by the surviving spouse as we have seen more than once on this forum.

Then there are vulnerable persons trusts, for people who are incapable of managing their own financial affairs.

So even with these few examples ( off the top of my head), trusts need not be the sole preserve of the very wealthy. There will be entirely legitimate scenarios which are not necessarily focused on IHT mitigation, but on beneficiary protection.