Will / Trusts question

[Enigmasaurus]

If there is a specialist in wills and trusts around I’d be very grateful for some advice

A relative has died and left a will. There are 5 surviving children (no spouse). The will leaves a small volume of liquid assets (less than the cost of the funeral, which are likely to be met by the family). The only other asset is a mortgage-free property.

The property is jointly owned by the deceased and one of the children (with an approx 30 percent share). The deceased portion has been put into a trust by the will with that child having a life interest and right to remain in the property until her death.

My trust law knowledge is rusty, and I was wondering about the following:

1. does the placement of the property in a will trust remove the property as an asset from the estate of the deceased?
2. if yes to (1), does this remove the asset from the inheritance tax calculation?
3. can any other person (e.g. a sibling of the life tenant) make a claim of expenses against the property in trust (for example to claim back funeral expenses) and could this force a sale of the property? I.e. would the debt of funeral costs from the estate take priority of over the trust?

There may be more, but these came to mind first!

Thanks in advance

I'm sorry, I can't help, but I wonder if you repost in Legal Matters www.mumsnet.com/Talk/legal_matters some of the legal eagles over there might be able to help. Or ask MNHQ to move this thread over there?

Good luck, it sounds complicated.

As the property is owned jointly, it would be difficult to force a sale, as the sibling that co-owns it, presumably has the right to retain their part of the property and not have it sold from under them?

With our trust, the 50% of the property that belongs to the siblings (late FILS half) is in trust til mil dies. She has an interest in possession which means she can live there til she dies, or needs care. Any IHT due will be paid by her estate, and she paid for FILs funeral costs.

scarytracher yes that’s my understanding given the co-ownership. But I was just concerned that if the estate has a debt, and the only asset has been put into trust, whether that trust could be revoked and a sale suggested / enforced to release equity and settle the debt.

I wouldnt think it escapes the estate as its put into a trust on death. At death that person owned it. It would just escape the estate of one of the children should they die as its not in their name yet. Im not an expert though - sounds complicated!

You need to put a call out for @mumblechum1

Thanks to all who have replied and to TumbleTussocks for your suggestion.

I have asked MNHQ to move this thread to the legal matters board to see if anyone there can help

Bump

Hi @Enigmasaurus

Wills/trust specialist here, but you may still need to get proper independent legal advice as these are just my thoughts (and not legal advice).

A) The first thing to check is whether the property is owned as joint tenants or tenants in common. This determines whether the property can pass by the Will or not. If you're saying the property is owned 70% by the deceased, it's likely to be joint tenants. But you should still check (look for wording similar to "No disposition by a sole proprietor of the registered estate (except a trust corporation) under which capital money arises is to be registered unless authorised by an order of the court" on the property register you can get from Land Registry).

B) Assuming it's tenants in common, the deceased can leave their share under their Will. It's also important to check who the remaindermen of the life interest trust are (i.e. who gets the capital after the death of the life tenant).

C) Turning to your questions:

1. Placing the property in a trust under the Will doesn't remove it as an asset from the estate. It will still be calculated as an asset for inheritance tax and probate purposes.

2. See 1.

3. Generally speaking, inheritance tax and expenses need to be paid before the rest of the estate (known as the residue) can be passed on in accordance with the Will. Without seeing the Will and knowing the financial state of the estate, it's difficult to comment. However, it's quite possible that if the estate doesn't have sufficient assets to meet the expenses without selling the property, a sale of the property could be forced. The life tenant would then retain their life interest over the remaining cash.

D) As a final comment, it's possible that anyone who was financially dependant on the deceased and who didn't receive anything under the Will would be eligible to make a claim for failure to make reasonable financial provision.

Hope that helps!

Best,

Alex

If you're saying the property is owned 70% by the deceased, it's likely to be joint tenants. I'm sure that should have read "unlikely to be joint tenants".

Alex thank you so much for your advice - I appreciate that we will still need independent advice but it is really useful to have a starting point of some knowledge from which to question (and allow I hope, sensible questions to be raised)!

I have a copy of the will, so I know who the remaindermen are and what their shares would be. I’m also aware that none of them were or would be financially dependent on the deceased.

If I’ve read what you’ve written correctly, it sounds as though the inheritance tax calculation is made on the whole estate (including the priperty now in trust) and settled as part of probate before any remaining assets are distributed? To my knowledge, the total assets outside of the property value would be insufficient to pay an inheritance tax bill. Given the will creates a life interest (and additionally contains a clause allowing the life tenant to sell and purchase an alternative property with the same terms as the current trust arrangement), would a sale of the property to settle a tax bill not go against the intention of the deceaswd to provide security (in the form of a property) for the life tenant? Or does the inheritance tax liability take priorty over what the trust is intending to do?

Apologies for more questions!

Alex thank you again for your words of wisdom!

I will liaise with the relevant parties and consult your forum for further / more formal legal advice. I has forgotten about the spouses allowance - he was married, she has already passed and all of her (minimal) assets went to him so there was no inheritance tax paid at that point.

The person who has the life interest is also an executor and trustee (just to make things more interesting), so I’m sure some kind of agreement would be reached if some tax is payable.

Thank you again!