Making a will - tenants in common and trusts

[MoneyFool]

I've been speaking to an advisor to do a will. She advised that we change our house ownership to tenants in common, then set up trusts so that whoever dies first - their money goes into trust for the kids so it can't get taken for care home fees or spent by the remaining spouse's new partner.

It all sounds good in theory but are there disadvantages to this?

If this is through a will company rather than a solicitor don’t do it. My aunt had a whole load of problems when she did this through a will company.

We've just done it.

Thoughts.

Set up costs were around £3k.

One can only protect 50% of the assets, there is tax to pay after the first death. Fortunately ours is mostly farmland which is currently tax exempt.

One could make the solicitors ones trustees but costs to do anything are both prohibitive and restricting.

You have to really trust anyone you choose as a trustee and once the trust is activated on the first death one cannot then remove one's chosen trustee unless they relinquish the role.

Definitely use a solicitor.

Thanks for the comments, this is through a will advisor. @Backtothe90ties what kind of problems did your aunt have?

My mother and stepfather had wills drawn up at the same time leaving everything to each other. However, they owned the house as TIC in unequal %s, DM owning 80% and DSF 20%. The will stated that the other person could remain in the house until they either began a new relationship or died.
The house ownership was drawn up by a solicitor well after their wills were written - before that, my dm owned the house fully.

@MoneyFool she was bullied by them when she didn’t want them to do the probate. They were going to charge a huge amount and there wasn’t much to be paid out. It was hugely stressful at a time when she was extremely vulnerable and very sad.

What if either of you needed the money in the case of the other partner dying?

@OceanicBoundlessness I don't fully understand it all (yet) as only just been advised about it by the woman we spoke to. But she made it sound like you still have access to the money but with permission needed from trustees eg can still move house and do what you want (within reason).

We have just done the tennants in Common thing so when one of us dies their half goes directly to our sons so they then own that half .it cost £400 to set up . I realise it only protects half the value of the property but I thought it may be worthwhile .

Doesn’t it actually protect the whole value of the property from something like care home fees?

ie. If spouse one dies, half the property goes to the children. If spouse 2 then needs to go to a care home, the property cannot be sold to fund this as half belongs to other people.

Spouse 1 dies. Spouse 2 meets a partner/gets a new job in another part of the country. At that point they need to sell up and move.

On the sale of the house, spouse 1's portion belongs to the children. Spouse 2 needs the whole portion to be able to move. The children don't approve/decide they'd quite like to have the cash, so spouse 2 can not afford the move.

Or spouse 1 dies. Spouse 2 needs to retire due to ill health. They decided to downsize to free up some cash or move to a bungalow due to mobility issues. However, one of the children is having a difficult time too. Their spouse is in their ear about how helpful it would be not to relinquish their portion of the sale and really it's unfair to set up a trust and break it. Spouse 2 can't afford to make the necessary changes.

Thanks OceanicBoundlessness, those examples are useful. The woman we spoke to said that the surviving spouse would still be able to move (even with a trust) but it sounds like this is something we need to interrogate.

I'm leaning towards not bothering with a trust as I don't feel I'd ever understand all the implications well enough without reading legal essays online.

The thing is, although in theory the children own half the property, they cannot do anything with it if it’s held in a lifetime trust. The surviving spouse can downsize, move home etc without the children’s permission required. The children then inherit half the property as owned by the remaining spouse at their death.

My parents did it and so have we.

It's no more complicated than you think, and has two benefits, that can't be replicated any other way.

What money should be used for care home fees? It's really something to think about. I've seen a £800 a week care home and a £1300 a week one. I know which one I would want for my family, so in the end the house would be sold to pay for it anyway.

Trusts are complex and have quite a few things that need to be dealt with - IHT returns for 10 year charges, Trust Registration etc. In my experience they are rarely looked after properly without expensive professional advice.

Things may go swimmingly, or there may be a breakdown in family relationships that make it a disaster. Advice from my old boss was never mess with the family home. It's your security. I'd rather be able to choose a nice care home at higher cost, than a grim place chosen by the council.

Oh and while we're at it, another colleague recommended reading King Lear before giving your key assets to your children.

One of these happened to someone I know. It caused a nightmare.
I assume whoever set up the trust was negligent then.

Yes, this is correct.

The point of it all is to ensure that the property doesn’t get lost out of the family, which often happens if spouse 2 remarries and then dies before the new spouse.

In this scenario, usually spouse 1 that died first would have wanted that property to go to their own children, not to their spouses new partner (and then often on to their children as well).

I have seen countless families dis-inherited in this way, and know that the parents would be devastated were they alive to see it.

Thinking about the scenario some of you have mentioned - where the last remaining spouse remarries, and then the property goes to the remaining spouse's new spouse or partner. Would the remaining spouse have to create a new will for that to happen? Or is there a way it could happen anyway, regardless of the will that remaining spouse made when his or her original spouse was still alive?

My DH is very disorganised and I can't see him getting round to writing a new will if he were to remarry. Also, he was disinherited this way - all his dad's money went to his dad's new, much younger wife when he died, due to a crap will. So thinking about it, my DH would be very unlikely to WILLINGLY let the house go to a new spouse if I died first. What I'm worried about is what may happen accidentally because he's a bit crap at doing 'grown up stuff' like getting wills written. But presumably if the will he writes while I am alive leaves everything to the children, then a new spouse of his would have to be very forceful to get him to change that will.

In that scenario, the new wife becomes his legal next of kin so would be able to contest any will that leaves her out entirely. Especially if the will predates the marriage.

I have exactly the same concerns as you re: accidental disinheritance.

People seem to think of marriage as some sort of romantic decision, and don’t take on board that they’re signing a legal contract.

I realise it only protects half the house, but in some ways, I think that's fair enough . Better than nothing ! I asked the bloke who wrote ours what would happen if we moved . He said the trust is set up now, so you would just put the new house with that trust .