Deed of trust - 5 years after death doesn't sound like very long?

[Stressymadre]

After some advice, please. Partner and I are buying a house together as tenants in common as he is contributing more deposit than me. All that is sorted. What we're struggling with is this the bit to do with our share of the house when one of us dies. I am 42, he is 46. I have 2 kids (10 and 14), he has none. My children will inherit my share of the house. My children will also inherit his share of the house. The draft proposal from our solicitor states that upon one of us dying the other can stay in the house a max of 5 years before they have to sell or buy the inheritees out. If he or I were to remarry or move someone in then we would need to immediately buy out the inheritees or sell up. So my question is... is 5 years fair? Doesn't seem very long but then I dont want my kids having to wait around for like 20 years for my inheritance! Has anyone done something similar and able to share their views?

I think, like Wills, it's very hard to make an agreement that meets your ever changing needs and circumstances throughout life. I believe you can both amend a deed of trust or create an entirely new one together if your circumstances change. Wills should also be regularly revisited to ensure they still meet your wishes.

Making your children the beneficiaries of your life insurance sounds good if it would set them up with a comparable sum. It sounds like you are in your 40s at the moment so you should be OK with the 5 Yr provision for the next 20 years. In your sixties you might want to be thinking of downsizing to somewhere smaller, more manageable and cheaper to run so that would be another opportunity to look at how you want to organise your share and bequests. I think you also have to consider that if one or other of you becomes incapacitated and unable to manage looking after the house after their partner has died they would need to move out then to save the property falling into disrepair. If you both make it together well into your 80s the 5 year clause could be annulled entirely as it would be hard going to relinquish your shared home at that stage of life. Lots to consider!

Yes fair point and agree on reviewing the wills

Life interest trusts are common but not the only answer.

to be honest 5 years is very generous and long enough to sort things out.

Make sure the title is tenants in common or else your will trust will automatically fail.

No one owns another house - if the property is in a will trust, the trust own it, and the trustees are named on the deeds, no individual is the owner.
The life Tennant has the absolute right of use for their life and then it reverts to the remainderman (in this case the children).
For IHT purposes its value is counted as part of the life tennants estate, and the capital gains value resets to zero on the death of the life Tennant so the remainder men get it free and clear.
Its normal for the LT to have it for life, this is good because the remainder men are usually fully grown adults when their nest egg arrives.

You don’t have to write a will now to last until your eighties. Now the need is to write a will that protects her Dc should she die while they are still children.

Her prime responsibility now is her children.

She can review and re-write her will in another 10 years to account more for the needs of an ageing partner.

Her children may need support if their Dad can’t see them through Uni. What if their Dad died too and he too has left his house to his partner with a life interest for 40 or 44 years?

I'll be honest, if I was OPs partner I would not be buying a property with her on those terms, especially putting in the lion share of the deposit.

He would be better off buying something of his own, smaller, and outright to give security going forward.

Thanks everyone, lots to think about. No easy answer is there!! I think we will do what is right now to protect the children and will amend when they leave home or have finished education. I want to make sure my children are looked after as their dad is utterly useless and prioritises his new family so I doubt they will inherit from him (his GF is much younger too so he will probably die first). But i also want to protect my partner in old age as he is fantastic step dad to my children and works very hard to ensure we are all cared for and loved, so he deserves stability in later life.

Yes it is reasonable at any age. If the couple had only been married to each other and they had children of their own only, the surviving spouse would not usually be kicked out of their home when one of them dies. The children would have to wait for their inheritance and the surviving spouse could also remarry.

For IHT purposes its value is counted as part of the life tennants estate, and the capital gains value resets to zero on the death of the life Tennant so the remainder men get it free and clear

What does this bit mean (genuine question)?

The value of the house gets counted as the life tenants for IHT, so if it is worth say £300K that is added to the life tenants estate on their death, and any IHT is payable from their estate.

At the point of the life tenants death the capital gains re-sets, so only an increase in its value after that date is taxed. meaning the remanderman (legal term for the final beneficiary, in OPs case the children) don't get hammered by capital gains.

Me too. It's their home!

Why are you making one or other of you homeless effectively within 5 years of the spouse dying. Your home belongs to both of you! If you popped your clogs at 76, your partner at 80 years of age would have 5 years left to countdown in the house and then out? 85 starting again somewhere new. Is the house worth enough so that half could buy somewhere straight out?

Your partner comes off very badly in this scenario, he puts in the bigger deposit then if you die he gets turfed out and has to give half the house to kids that aren’t his? Does his bigger deposit at least get ring fenced so he gets the same percentage back that he put in before you divide it?

At least if he dies you have more likelihood of your own kids goodwill to let you stay on longer if you want to but even so I wouldn’t be handing over control of my life and finances to them.

Very odd set up, I wouldn’t be agreeing to this.

Yes of course his bigger deposit is ring fenced, that is what the deed of trust is for, otherwise we'd just be joint tenants. As for him leaving his estate to my children, that is entirely his choice. That is who he, at this time would want his share to go. Obviously he can change that at any point. He can leave it to the local charity if he wants!

To be clear on the above, he will own more than half the house, as he is putting in bigger deposit

With my in laws, there was no inheritance until both had died.

I think it’s reasonable for the age and stage you are at. As a PP said, you don’t have to write a will in your 40s and keep it the same till you’re 90. You might want to change it later in life, but when you are both relatively young and there are children involved, I think it’s sensible. Five years is a good length of time at this stage of life.

This is exactly what is stated in our trust, first my mums who died, now mine as the heir to her half. My dad has right to live there until his death then it all reverts to me.

Thank you.
We have a tenancy in common, 50:50.
We are married and the DC are ours (neither of us have any from other relationships).

The idea is, if one of us dies, then that person’s share goes into trust for our DC and the surviving person can live in it for life.

If the surviving person re-married, their Will becomes void but the deceased’s share remains in Trust for our DC.

If the surviving person dies, their share of the house may go to their new spouse who in turn may then have their own DC as beneficiaries, effectively cutting out (intentionally or otherwise) our DC. So at least half of the house will be protected for the DC.
The mental gymnastics!

More generous than mine…DH has 2 years! My reasoning is that I don’t want DS to be saddled with having to care for DH-we’re mid 50s though.

Yep, that's all correct and good estate planning, it has another benefit that if you both live to be old and grey it can protect the 50% against care fees, if the survivor has to go into care, the 50% in trust cannot be touched by the local authority, that's not a dodge or fiddle, as legally it never belonged to the survivor and still does not, likewise if the survivor re-mortgages, hits a vegas casino and goes bust, that 50%, bullet proof!

As you are married the IHT benefits of a married couple remain, in that you can in effect pass up to £1m tax free to a direct descendant comprised of x2 Nil Rate Bands of £325K and x2 Residence Nil Rate Bands of £175K.

the life interest trust has to be registered with the TRS on the first death, but has no 10 year or exit charges, so is tax free in its lifetime, and of course as I said up to £1m transfers free of IHT and the CGT is "re-based" or re set so if the children sell up more or less immediately as part of probate there is no GCT to pay.

Thank you! That’s reassuring - it all made sense at the time then you start doubting your understanding.