Trustees Of An Estate

tidyfinance

Hi guys,
This is a posting that is on behalf of my wife. Her mum has recently moved into sheltered accommodation, leaving behind a house that was put into trust for my wife and her four brothers by her late dad.
Within my wife's late dad's will, he stipulated that his wife would have a life long interest in the property and the house could not be sold without her consent. My wife is looking to sell the property with her mums consent however, following a brief discussion with a Solicitor, the advice has been that the proceeds from the sale would need to be invested and could not be split between the five siblings until her mums death.
The Solicitor has advised that as my wifes mum has a life long interest in the property, she would be entitled to the interest made from the proceeds from the sale. Surely there has to be a way around this, the Solicitor has mentioned something about tax implications?
We aren't talking masive amounts her as the property is only worth around £100K (my wife will obviously get the house valued).
Any advise would be very much appreciated.

sloughflint

tidyfinance wrote: »

Hi guys,
This is a posting that is on behalf of my wife. Her mum has recently moved into sheltered accommodation, leaving behind a house that was put into trust for my wife and her four brothers by her late dad.
Within my wife's late dad's will, he stipulated that his wife would have a life long interest in the property and the house could not be sold without her consent. My wife is looking to sell the property with her mums consent however, following a brief discussion with a Solicitor, the advice has been that the proceeds from the sale would need to be invested and could not be split between the five siblings until her mums death.
The Solicitor has advised that as my wifes mum has a life long interest in the property, she would be entitled to the interest made from the proceeds from the sale. Surely there has to be a way around this, the Solicitor has mentioned something about tax implications?
We aren't talking masive amounts her as the property is only worth around £100K (my wife will obviously get the house valued).
Any advise would be very much appreciated.

I am not sure what you are trying to achieve ( "be a way around this?") but what you've described sounds like a Protective Property Trust and if so the solicitor is correct.
Find the paragraph on PPT here for more information:
http://www.heritagewills.co.nr/care_fees_mitigation.htm

The gift of the share of the home is postponed until your MIL's death.If MIL is downsizing, the the capital surplus is held in Trust and your MIL is entitled to interest.

Debt_Free_Chick

In general terms, the trustees are holding the property (or its equivalent) for the benefit of the beneficiaries. In this case, MIL has a lifetime interest. Effectively, then, the trustees hold the property for the benefit of your MIL for so long as she lives.

Even if they sell the property, the cash they realise is still to be held "for the benefit" of your MIL for so long as she lives. That would point towards her getting the interest on the investment of the cash.

There are two issues here - the capital value of the assets (property or, if sold, cash) and the income/interest derived from the investment of those assets.

At the moment, the property has a rental income value, which would be acheived if the property is let. MIL would be entitled to that rent. Instead, she it getting the benefit of occupying the property with the rent that she would normally pay cancelled out by the rent she would be due, if the property were let to someone else.

The same principle applies to the interest on the cash.

sloughflint

Tidyfinance, I was wondering what you meant about tax implications....

Your FIL chose the most tax efficient and safest method for his wife if it is indeed a PPT.
Had he had gifted his share of the house directly ( without life interest), there would have been CGT issues for the children and potentially his wife could have been pushed out of her home ( bankruptcy, divorce).
Perhaps that's what the solicitor was saying to your wife?

tidyfinance

sloughflint wrote: »

I am not sure what you are trying to achieve ( "be a way around this?") but what you've described sounds like a Protective Property Trust and if so the solicitor is correct.
Find the paragraph on PPT here for more information:
http://www.heritagewills.co.nr/care_fees_mitigation.htm

The gift of the share of the home is postponed until your MIL's death.If MIL is downsizing, the the capital surplus is held in Trust and your MIL is entitled to interest.

Mrs Tidyfinance here....Thanks for all of your replies. I am trying to understand what the implications are (Tax), or indeed if my mum can relinquish her life long interest in the property. My mum is happy and settled in her new home and would like the property to be sold and split between her children.

sloughflint

I think your best bet is to ask the solicitor to explain things to you again.

Was my guess correct about PPT? When did your father die?

As said before, PPT was probably the safest way for your father to pass his share of the property to you and your siblings whilst keeping your mother safe in her home and offering her flexibility to move or downsize had she wished to do so.

If your father's share had been gifted outright to you all, you would have had CGT liabilities on the increase in value between date of death and sale, I think.

My mum is happy and settled in her new home and would like the property to be sold and split between her children.

Even if the Will was to be varied ( within 2 years of death) to gift your father's share outright to you all, I can't see your Mum being able to gift her share to you as well in case she needed to go into care in the future. The LA would still count that value for assessment purposes.

But I'm no expert.Do speak to the solicitor again until you are clear what options there are ( if any!)

sloughflint

You could of course also try posting on the 'cutting tax' section to see if you get more replies.

kunekune

Ignoring tax and benefit implications, there is no reason why your mum cannot have the trust brought to an end. If ALL the beneficiaries, that is, the life tenant and those that take after her, agree, they can choose to end the trust. It would only be a problem if some beneficiaries were still minors. Another possibility to ask for a variation of trust or, if the problem is that she wishes your generation to benefit sooner rather than later, ask the trustees to make an advancement of the capital. It isn't possible for your late father to completely control what happens from beyond the grave, so to speak, but it has to be done correctly. And there are obviously major tax implications. Who have you been getting the advice through? It might be worth the remainder beneficiaries (ie, you lot rather than your mum) asking for some independent legal advice.

tidyfinance

I can't see your Mum being able to gift her share to you as well in case she needed to go into care in the future. The LA would still count that value for assessment purposes.




Hi again, I am waiting for a copy of the trust document from the solicitor to fully understand the terms, but can confirm that my Dad passed away 12 years ago. The advice my Dad's solicitor gave him was to put the house in trust for his five children whilst still protecting my mum by allowing her to remain in the property. I am aware that we need mums consent to sell, but she does not have a share in the property (unless you are referring to the life long interest aspect)?

sloughflint

tidyfinance wrote: »

I can't see your Mum being able to gift her share to you as well in case she needed to go into care in the future. The LA would still count that value for assessment purposes.




Hi again, I am waiting for a copy of the trust document from the solicitor to fully understand the terms, but can confirm that my Dad passed away 12 years ago. The advice my Dad's solicitor gave him was to put the house in trust for his five children whilst still protecting my mum by allowing her to remain in the property. I am aware that we need mums consent to sell, but she does not have a share in the property (unless you are referring to the life long interest aspect)?

Well it does sound like a PPT to me ( no expert here.....until recently I used to say Life Interest Trust) which was a very good idea for several reasons if there were going to be no IHT issues.

In your post number 5, I got the impression that your Mum was wanting all of you to have the whole house ( or rather the value of it if sold) right now as she did not need it anymore.

I'll try and explain myself again:

What I was trying to explain in the bit that you quoted, is it is not as simple as that even though she doesn't need the property anymore for various reasons.
Splitting the property into two shares A and B; A being your father's share.....

As I see it, the way things stand A has been put in Trust for you children with a lifetime interest for your mother. The gift is postponed until your mother's death. Even though your mother is not using the home, she is entitled to a benefit from her husband's share. Reading between the lines from what the solicitor seems to have told you that if the house is sold, the capital A is put in Trust and your mother is entitled to interest from it ( depends on the exact wording of the Will). I'm purely guessing that similarly, if the house was rented out, your mother would probably be entitled to the rental income your father's share produced.

So I was thinking the only way around it if your Mum was desperate for you to have the money now, despite very unfavourable consequences, was to undo/change what the Will said and give A straight to the children and your mother get B. It is however too late to do this ( 12 years).
I then went on to say what negative consequences this would have for you if it had been possible:

• You ( the children) would have had CGT liabilities on the increase in value of the property between your father's death and date of sale.

• Although your mother very generously wanted to give you all her share B now, she could be depriving herself if she needed to go into care in the future ( google deprivation of assets)

It is too late for a variation of the Will but Kunekune mentioned the possibility of bringing the Trust to an end. The tax (A)and deprivation issues (B)would still be there though,I believe.The children would get some money now(A-tax) but not the value of the whole house (A+B).

The solicitor should explain things a lot more clearly than my poor attempt and advise. If it was me, I'd keep things as they are and try to explain to your mother than it is financially advantageous for the Trust to remain.

Sorry if I've made even more of a pig's ear of an explanation.

sloughflint

Oh dear Mrs Tidyfinance.What a mess I'm making of your thread!

I've read your last post again and realise that you said that the house was put in trust, not half. I take it, that it belonged to your father outright in his lifetime.

Sorry rather than completely edit my last post, ignore my use of A and B.

So the deprivation of assets is not an issue now.....just the tax I think. See above.