Inheritance nightmare - charge against the house

[DoneOver]

My step dad has died. His will leaves me and my siblings my mum's house. (She died first, house nothing to do with him.) However we have now found out that a while back he put a charge against it which gives most of the house value to his own daughter. (not my mums child.) Clearly mum stuffed up by dying before she wrote her will. But its very unfair, is there any legal redress at all?

How do you get on with his daughter?
What, if anything, would the house fetch, in a forced instant sale, right now?

That's an important bit of homework, you need to get opinions before going to the lawyer, and you need to be unusually thorough.

Valuers are used to giving a range of guesses, for probate or for trying to attract the potential sellers. But markets are unprecedented at present.
Is it potentially worth less than the charge? It stinks, but maybe walk away without throwing good money at lawyers for too long?.
Yes, you need to ensure the daughter has it insured, if she intends to exercise the charge, making her the main (or sole) beneficiary .

If the house and or the daughter and or the potential aggravation, and fees, mean the inheritance is worthless, there is the option of refusing a legacy.

@20mum thats interesting, didnt know that about refusing a legacy. Yes, I wonder if we may well have to go that route since house is currently worth roughly the charge against it and it all seems such a hassle

@dontdisturbmenow there was no mortage on the house, that I know. Step dad collected the rent after she died. His new wife gets it currently. Yes I believe there are still tenants. As it stands he has left us nothing other than a headache (house is worth about same as the charge currently.) So forgive me if Im not grateful.

Not course, if there was no mortgage and the charge is to the value of the house, it stings.

This charge is just so odd. If the house was his and his solely, all he needed to do was leave to her in his will. It implies that she Kent her a lot of money that she wanted back when the house was sold. What circumstances would she have lend him money? Is she rich that she's got £300k to lend her father?

@dontdisturbmenow as Ive said, I assume that he worried we'd challenge mum's will so thought he'd bank what he could for his own daughter while he could. Perhaps. I guess its all speculation since hes dead now and we cant ask him.

This way we would have still been stuffed even if we did, I assume

No. Wouldn't have made any difference. If you had contested your mother's will the courts would have had no problem unwinding this charge. And I still have a problem with the charge if his daughter didn't lend him any money. Please get proper legal advice.

I’m sorry to hear this OP.

I’m guessing that the charge was something to do with inheritance tax. Perhaps he wanted to create a debt on his estate to keep the overall value below £500k.

Or maybe it’s to do with having a property to leave , to increase the threshold from £325k to £500k.

Or perhaps a way of getting around the 7 year rule for gifts.

I bet it’s something like that. Not That I’m any sort of expert,

The bit I don’t understand is - surely the solicitor would want to see evidence of the £300k being lent by the DD to her father ? I have a charge over a property that one of my children own and the money had to go from my account to the solicitors , and I had to show proof of where I’d got it from.

I’d wonder where that money is now. It’s a lot to spend, especially if he’s also had the rental income from the property.

Defo worth getting Legal advice, hopefully you can split the cost with your siblings as you all have a common interest in this.

Get all the paperwork together and write a clear and factual account of what happened.

I’d also think op you’ve still not got the full information.

A charge is to secure a debt, as such, I suspect the daughter has lent him the money the estate now owes her.

If a solicitor allowed a charge to be placed on this property, correctly and formally, which it seems they did, and the probate solicitors are accepting it, then there would have been an evidenced debt behind it.

I don’t think this is what you think it is. I’m sorry. I think she’s lent him money and he didn’t need to repay it, he used the house as his repayment. Basically he sold her the house and used the capital for other purposes.

A bit like those equity release schemes but with his own daughter. You still need to find out more info I’m sorry.

I think you should hire a solicitor to ensure funds actually were transferred, i.e., that the charge is valid.

Op there really is no point carrying on posting here.

You need legal advice from a solicitor to check if there are avenues you can pursue here. Well worth getting considering the potential value of the asset

@ Onceuponatimethen yeh I know, not much I could do over the weekend other than get it off my chest. However the thread has given me some angles to explore so thats good.

O.P. you answered your own question at last. You have revealed the value of the house, at most, is the same as the charge (i.e. loan) secured against it. With Covid, let alone all the complexities, it is certain to be a minus sum. Don't waste a moment or thought, or a legal fee. Reject the inheritance.

Others have been right to urge you to go to lawyers. But that absolutely does not apply where you have nothing at stake to gain, and lawyers aren't free, so you have an open cheque to lose.

Of course there's an option to refuse legacy. (Otherwise, you could be left malicious gifts such as a houseful of worthless furniture to someone in a bedsit, or a delivery of manure.) But research, instantly, the process to reject legacy. Do it fast in case there's a time limit.

Do It Yourself if at all possible. It ought to be feasible for a layman. In the worst case, if you are forced to get a lawyer to sign, or witness, or file, you can get a quote for exactly that.

P.S. Arguably, law should be on-line easily searched and, in unusual exceptions, online N.H.S equivalent N.L.S. (national law service) specialists could chip in their experienced expertise. There's a curiously close match between professional medical and legal practices. Both can be good, bad or negligent, both can transform lives by doing the right and best-informed thing, or permanently wreck lives by being less than good .

However, doctors employed by the taxpayers don't usually gain financially from giving advice which deliberately exacerbates and prolongs the troubles of the customer. Trainee lawyers may very well have exactly as high (or low) moral ethics and intentions as trainee doctors, but both then run into the realities and traditions of disastrously continuing doing things the same old way, never whistleblowing.

Doctors bury their mistakes. Lawyers unfortunately get more money as a perverse incentive to prolonging and complicating cases, till the customers can potentially be, and sometimes are, left penniless and in impossible debt, with every possible asset stripped away for legal fees and court costs. It isn't the fault of practitioners that nobody, nobody in this country, is "equal before the law".

I think it would be unlikely that a charge of nearly the full value of the house would be allowed. That is why you need legal advice before coming to a decision.

Don't waste a moment or thought, or a legal fee. Reject the inheritance.

Very poor advice. The charge may not be valid so the OP may have quite a lot to gain.

Get the wording of your mum's will checked.
Right now you have nothing to lose and the ones who make money if you win, will truthfully tell you if you have a hope.

@20mum I’m assuming you’ve had a bad experience with solicitors? The firm I work for are regulated and we’d be in a lot of trouble if we did what you’re describing, we always work in the best interests of our clients and if that means telling them that they have very little chance of success then we will. The negative publicity alone would outweigh the benefit of dragging things out.

As long as the OP shops around and confirms costs in advance it may not be worth refusing the legacy, if the value of the house is more than the charge. This is why she needs independent legal advice.

On another point OP you would never become liable for any debts, so if the charge is more than the value of the property, say the charge is £300,000 and the property sells for £280,000 then you would just get nothing and she would get £280,000 and she’d have to write the £20k off.

P.p.s. Daughter's suspected part in fraud, or something close to it, and/or tax evasion, or something close to it, are Avenue's Definitely Not Worth Pursuing, because of the worry, the legal costs and the extremely remote chance of victory.

(You turn up in court clutching your piggy bank, while she sits on assets of two houses, plus potentially gets taxpayer funded 'free' legal aid for defence against criminal charges. Plus, she and her dad will probably have used a cunning lawyer or accountant to devise the scheme. )

However it was interesting to notice the 'charge' was more or less the full value of the house. (Or more, on the date?) No remortgage or equity release would have been so generous. One of the property sites, Zoopla, and maybe others, will show that. I'm anticipating the 'loan' will show as 'there or thereabouts' the full market value at that time, but if full value or if above, it would look suspicious to a tax inspector. In fact, as others have posted, a tax inspector might take an interest in what could look most unusual.

The man already had his own house, so what was the purpose of the 'loan' on his wife's? How did the daughter come to have such a large sum lying round to 'lend' to him? Did he also take out a 'loan' on his own house,? If so Land Registry records will show who lodged any charge, and when. Land Registry is an open public record. Did the daughter inherit two negative equity houses? Had she 'loaned' against both?

You can't ask to trace the money, but tax inspectors can. Again, other posters have speculated about the inheritance tax situation of a daughter inheriting whatever cash or valuables are visible for probate, plus two houses, versus inheriting only one of the houses, the other having been stripped of all but negative equity by an extraordinary method of advance planning.

Assuming she is his only child, she gets the house when you reject it. It would look even more interesting to the tax inspectors.
To you, it doesn't look like anything but a poisoned chalice.

I definitely think this is worth pursuing actually. The charge is a debt. You own a house which is held as collateral for a debt. A swift letter from a solicitor to the daughter asking that the debt be repaid in three months otherwise you'll repossess and take full unencumbered ownership may well be enough for her to say just have the house. Think about it - if the charge was a mortgage company that's what they'd do.

OP - please ignore 20mum. She clearly doesn't know the law.

It is not possible to say from the information posted what your chances of winning are if this ends up going to court. If you and your siblings bring a case it will be a civil case, not a criminal one. The daughter will not be able to use the disputed house to fund her legal costs and will not get legal aid.

I can't be bothered to pick apart the rest of her post.

Actually ignore me - it's the other way round isn't it? Worth pursuing the legality of the charge though. Even if just for your own peace of mind.

I agree with @titchy. It is worth spending a little on solicitors to find out the legality of the charge.

Particularly as the charge was made 'a while back ' - what was the value of the property then?

OP, I know you've already made it clear that the house was mortgage-free and it would not be possible to put a charge on the house without their agreement if it had been (mortgage companies usually retain first dibs in these circumstances!).

I'm sorry you have discovered that your mother's will wasn't what you thought it was - perhaps that was the bit she was intending to rewrite.

I don't think you'll be liable for any shortfall between the amount of the charge and the (assumed) debt, surely that would be your stepfather's estate so please don't reject the inheritance or ask for a variation of the will on that basis? It may mean that you don't get any benefit from your mother's house if the charge is valid and the house sells for less than the amount.

I really would speak to an expert about this to see what can be done and explore the options. Good luck with it all, OP

I don't think you'll be liable for any shortfall between the amount of the charge and the (assumed) debt

You are correct. The OP and her siblings will not be liable for any shortfall. That comes out of the estate. Indeed, it is not necessarily the case that the loan, if there is one, must be repaid purely from the value of this house.

I think you should persue the £300k charge, tell the solicitor you want proof of your step dad receiving it to place the charge on the house, and advice them you will be contacting income tax revenue office.

Get a Solicitor and find everything out for sure. Did he recieve money or did he put a charge on the house just to disinherit you.
Even if the house is worth less than the charge you won't have to pay it. Look on here www.nidirect.gov.uk/articles/debt-when-someone-dies