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To think this sounds like financial jigery pokery

(13 Posts)
Pungifries Wed 03-Apr-19 12:40:35

First time poster but long time lurker

Please could some of you clever mumsneters help make sense of this situation

2 years ago FIL sadly died. Due to the way the house was owned, this passed to MIL despite them being divorced for 20 years and her never having contributed to the mortgage (they basically bought it and divorced, he continued paying the mortgage). It was expected that the house would have been left in entirety to DH, BIL and SIL but we weren’t particularly shocked or upset by how it transpired.
MIL did not want the house however as she has a lovey council house on the outskirts of London. She is nearly retirement age and therefore wants her rent paid for this and to stay there. She also has circa £50k debt that she pays at £1 a month through debt management. She did not want to have to repay this due to receiving the house.
Anyway, she decided to rent this property out for approx £1k/month. She has not declared it to debt management company.
As is quite typical of this family, 18 months ago a big argument occurred and DH and myself are now the proverbial black sheep with MIL, BIL and SIL not speaking to us. I’m fairly happy with this situation as they have repeatedly hurt DH and are generally quite a nasty and feuding family, I think it’s better for our mental health that we stay away from them.
Anyway, I received a phone call from the long term partner of SIL as there have been more family rows (surprise surprise). In anger towards BIL, he has let slip that the house has been transferred over to BIL and SIL in trust so that MIL does not have to pay debt.
He tells me that DH, BIL and SIL are beneficiaries of the property when MIL dies but she will continue drawing the rent until then. The house is also up for sale. He says that if it sells, BIL and SIL will reinvest as they see fit.
BIL and SIL had originally intended to borrow £25k each from the property but were unable as they declared there was 3rd party interest in the property (DH) and so the mortgage company would not lend against it.
Does this sound dodgy to you? MIL and I fact whole family except DH have a long history (and a criminal conviction) of benefit fraud and general financial dodginess like illegal subletting.
Can you just give away property to avoid paying debt?
Can you make someone a beneficiary of a trust without informing them?
Can you still claim rent if you have transferred the deeds over to someone else?
Can trustees just sell the property without telling DH?

PlainSpeakingStraightTalking Wed 03-Apr-19 12:48:46

If she is getting HB and also renting out the inherited property - then she is committing fraud as she has assets over 6K

www.gov.uk/housing-benefit/what-youll-get

Council and social housing rent

How much you get depends on:

your ‘eligible’ rent
if you have a spare room
your household income - including benefits, pensions and savings (over £6,000)
your circumstances, for example the age of people in the house or if someone has a disability

UnderMajorDomoMinor Wed 03-Apr-19 12:52:13

I might get this moved to legal or money matters. It sounds deeply dodgy but people on those boards are more likely to know how DH needs to extricate himself.

Is it still mortgaged?

Pungifries Wed 03-Apr-19 13:01:54

Thanks for your replies. It feels really dodgy to me too but I’m not savvy with all this! I’ll try and move the post but not sure how!

I’m not sure if she is claiming HB, as she works ATM but wanted to get her rent paid when she retires (she’s early 60’s now).

No, the property is mortgage free.

PlainSpeakingStraightTalking Wed 03-Apr-19 13:08:38

Can you just give away property to avoid paying debt?
Sort of - anyone can reject anything left to them in a will

Can you make someone a beneficiary of a trust without informing them?
Sort of - you can hide your assets in what is known as a 'will trust' - ie transfer them into the trust, where you can draw interest free loans, but the trust will eventually default to the beneficiaries. This isi quite a common inheritance tax avoidance technique.

Can you still claim rent if you have transferred the deeds over to someone else?
That would be a private agreement. But! if she is getting the rent, then there are tax implications

Pungifries Wed 03-Apr-19 13:10:54

Thanks for that information PlainSpeaking

BarbaraofSevillle Wed 03-Apr-19 13:25:49

Sounds like the whole family need professional advice on this, but if they're of the type to commit benefit fraud and are generally financially dodgy, then they're unlikely to want to pay for it, or take the advice for that matter if it's not what they want to hear.

How much is the property worth? If MIL has been on the debt management plan for years (why didn't she go bankrupt for that amount of debt and no surplus income?) her creditors may accept a full and final settlement of substantially less than £50k, which may be a fairly small proportion of the property value.

If she likes where she lives, I can see the advantage of staying there, with the secure tenancy. If she invests the proceeds it may provide an income to pay her rent and she will be able to possibly be able to gift some money to her DCs and if it runs out, go onto HB when her capital falls below the threshold. Why does she think that the taxpayer should pay her housing costs when she can afford them herself?

Pungifries Wed 03-Apr-19 13:36:12

BarbaraofSeville

She thinks everyone should bank roll her as she has had a hard life... (don’t get me started).
I completely agree that she should make an offer on the debt but she is happier paying £1 a month 😮
House is up for sale at £230k

CornishMaid1 Wed 03-Apr-19 13:39:20

Reading between the lines, what I am guessing has happened is the Will has been varied to give MIL a life interest.

A beneficiary can vary their legacy in a Will for up to two years after death. This means that MIL could alter FIL's Will so that, rather than her receiving the property, the property is placed in trust so she has the benefit of it during her lifetime with the trustees (usually the Executors so could be BIL and SIL) holding the property and it going to someone else on MIL's death (such as DH, BIL and SIL).

It is perfectly legal to do that. The gift is treated as being by FIL as it is 'written back' into his Will, so the property never went outright to MIL.

She would be entitled to the income (so taking the rent) but not to the capital.

It may not seem nice, but can get around her losing her benefits.

However, if she has a debt management and is on benefits, she should still have declared the fact she is getting the rent from it as that may affect what benefits she gets and increase her debt payments. Her not declaring that could be seem as fradulent rather than the changing of who owns the property if that was done properly.

Pungifries Wed 03-Apr-19 13:42:00

Thanks CornishMaid. Are SIL and BIL / and MIL entitled to sell the property? What happens then?

CornishMaid1 Wed 03-Apr-19 14:02:26

If they have done it as I am thinking (rather than just something informal between themselves with a 'don't tell the benefits office'), then the property is held by the trustees.

It is difficult to say for sure without seeing the paperwork.

For a life interest you have three sets of people - the trustees (who hold the property - could be the executors under the Will so could be SIL, BIL, DH or a combination), the life tenant (MIL) and the remaindermen (who gets the property/money after MIL dies - again likely SIL, BIL and DH or a combination).

Usually when I have one, it says that the trustees hold the property, so they are the ones who sell the property and sign the paperwork, but it often says they will not sell without consent from the life tenant (so could not sell unless MIL agrees).

If MIL agrees, the trustees market and sell the property and they are entitled to do so. They would then decide what happens to the money after - they could buy another property or invest it for example. MIL would not get the money - if she has a life interest she just gets the income, so the interest off an investment, the rent if a property is let etc, not the capital itself. That is kept invested by the trustees until MIL dies and then they would split it between the remaindermen.

Sorry to be a bit vague, but if that is what MIL has done, she could vary the Will however she liked so without seeing the paperwork (or having her say) you would not know who the trustees or remaindermen are.

If she has actually inherited the property and is just pretending it is in trust then MIL would be selling and doing what she likes with the money and hoping she doesn't get caught.

Pungifries Wed 03-Apr-19 14:09:21

Thank-you so much CornishMaid, that makes sense in light of what I have been told by SIL’s partner.

Pungifries Wed 03-Apr-19 17:10:31

I’m really grateful for all your help with this CornishMaid. Could I just ask one more question...why would BIL and SIL he refused a mortgage on the property due to 3rd party involvement (DH) but still be able to sell? Could it potentially be a different type of trust?

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