Interpretation of will wording

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Quincunx
Quincunx Posts: 19 Forumite
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in Deaths, funerals & probate
I am an executor of my wife's will.
It contains the following bequest:

I give to my son xxxxx upon attaining the age of 18 years my property known as yyyyy and this gift will be subject to tax.

The boy is not yet three.

I am the father of the boy.

The property is not the family home and was in her sole name.

What action do I have to take as executor to give effect to this bequest.

I'd like to understand the implications prior to speaking to a lawyer.

Any help and advice will be much appreciated.
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  • nom_de_plume
    nom_de_plume Posts: 959 Forumite
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    Questions rather than answers....


    Is the property subject to a mortgage or similar?


    Is inheritance tax likely to be due on your wife's estate?



    Is it a rental property and, if so, is it running at a profit?
  • System
    System Posts: 178,094 Community Admin
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    So sorry to learn of your circumstances. You will need to speak to a solicitor, as the property will need to go in trust until your son is 18. You have a huge number of people on this forum with a massive amount of collective knowledge at your disposal, but don't put off seeing a solicitor for too long. If you are worried about running up a large legal bill, go to a solicitor who offers an hour for free, with no obligation, and ask what you need to ask. If the solicitor who actually drew up the Will is local to you, and offers a free hour, so much the better.
  • Quincunx
    Quincunx Posts: 19 Forumite
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    The property is owned outright.
    It is a rented property but I don't know at this stage what the profit/loss position is.
    The estate is likely to be subject to IHT
    Thank you for your help.
  • nom_de_plume
    nom_de_plume Posts: 959 Forumite
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    Quincunx wrote: »
    I give to my son xxxxx upon attaining the age of 18 years my property known as yyyyy and this gift will be subject to tax.
    Quincunx wrote: »
    The property is owned outright.
    It is a rented property but I don't know at this stage what the profit/loss position is.
    The estate is likely to be subject to IHT
    Thank you for your help.

    The mention of the gift being subject to tax could be a concern if there's IHT to pay as this could have the potential to reduce the inheritance value of the property. In other words it may have to be sold and converted into a reduced cash sum OR cash would have to come from elsewhere technically from your son and back into the estate to offset the deficit so as to enable the property to be retained.

    Usually IHT come initially from the residual pot and not from specific legacies (where the estate content permits) but the wording of the Will makes me uncertain on this when it states subject to tax.

    Legal advice is certainly the way to go as it may well be that selling the property and converting the funds to an alternative investment will be a better way forward.
  • Voyager2002
    Voyager2002 Posts: 15,285 Forumite
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    As others have said, legal advice is the way to go...


    As I understand the situation, the property will go into trust until the child reaches 18 years old, and so should not be included in any calculation of inheritance tax at this stage. However, when the child takes possession there may at that point be a tax bill. It would have been more tax-efficient if she had left the property to her spouse with a request for it to be passed on to the child in due course. If the amount of tax would be large, it might be worth investigating whether you could change the will through an Instrument of Variation.
  • Yorkshireman99
    Yorkshireman99 Posts: 5,470 Forumite
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    Voyager2002 wrote: »
    As others have said, legal advice is the way to go...


    As I understand the situation, the property will go into trust until the child reaches 18 years old, and so should not be included in any calculation of inheritance tax at this stage. However, when the child takes possession there may at that point be a tax bill. It would have been more tax-efficient if she had left the property to her spouse with a request for it to be passed on to the child in due course. If the amount of tax would be large, it might be worth investigating whether you could change the will through an Instrument of Variation.
    A DOV I not possible because the beneficiary is a minor. Holding the house in trust for that time is a bi responsibility and not to be taken lightly
  • nom_de_plume
    nom_de_plume Posts: 959 Forumite
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    Yorkshireman99 wrote: »
    A DOV I not possible because the beneficiary is a minor.


    An adult beneficiary could however create a DOV in favour of the minor.
  • Keep_pedalling
    Keep_pedalling Posts: 16,628 Forumite
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    Voyager2002 wrote: »
    As others have said, legal advice is the way to go...


    As I understand the situation, the property will go into trust until the child reaches 18 years old, and so should not be included in any calculation of inheritance tax at this stage. However, when the child takes possession there may at that point be a tax bill. It would have been more tax-efficient if she had left the property to her spouse with a request for it to be passed on to the child in due course. If the amount of tax would be large, it might be worth investigating whether you could change the will through an Instrument of Variation.

    I am pretty sure the bequest going into a bare trust does not negate the need to pay any IHT due.
  • Quincunx
    Quincunx Posts: 19 Forumite
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    Thank you all for your help and advice.
    It has given me a great deal to think about and will help me in my discussions with a lawyer.
    A sad twist on this was my wife and I had discussed this bequest and had agreed that the property should come to me direct. A new will had been drawn up and was awaiting her signature. She died before this could happen.
  • getmore4less
    getmore4less Posts: 46,882 Forumite
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    Voyager2002 wrote: »
    As others have said, legal advice is the way to go...


    As I understand the situation, the property will go into trust until the child reaches 18 years old, and so should not be included in any calculation of inheritance tax at this stage. However, when the child takes possession there may at that point be a tax bill. It would have been more tax-efficient if she had left the property to her spouse with a request for it to be passed on to the child in due course. If the amount of tax would be large, it might be worth investigating whether you could change the will through an Instrument of Variation.

    I do not believe going to the trust takes the house out of the taxable estate of the deceased.

    It will reduces the transferable nil rate band to spouse as well.

    The trust is most likely to be a bereaved minors trust so there are some different rules for those.

    A google search and a browse of the IHT manuals may help with the knowledge base before speaking to the solicitor.

    eg. one reference.

    https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm42815
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