Tenants in common and trust in wills: is it worth doing?

[Mermaidsaremiracles]

Just that really. Has anyone done this??

DH and I have 2 young children and have recently had a will done. They explained about changing to tenants in common, so that if one of us dies, their half gets put into a trust for the children. The surviving spouse would then have a lifetime interest in the property, but it would pass to our children on death. At the time they said it would be protected from care home fees so our kids wouldn't be left with nothing if one of us went into care, and also means in the event of a second marriage the kids aren't disinherited.

My concerns are - what if I DO need to pay for care while I'm still alive, and don't want to end up in a state when I'm elderly? What if I want to move, downsize or sell up and move into rented - will this be made really difficult? Is it absolutely necessary? Are there any alternatives, like leaving a chunk of money in trust instead?

I have paused the process until we've looked into it a bit more. We are both early 40s, with minimal savings but a decent property which is probably worth about 300k. If that makes any difference!

I'd really appreciate thoughts!

You still own the house but as tenants in common not necessarily 50/50 the ownership should be specified in a deed of trust so not all of it is yours or will be once he dies. But if one of you dies you then the remaining party cannot sell to fund care as you would own it with the children. This is a minefield with care costs. I wouldn’t take it that you are safe from the local authority going after care fees. A lot of estate planners suggest this but most are unqualified in legal matters. If you search trusts and McClure’s it gives warnings about trusts to avoid care fees and families are spending thousands unnecessarily to unpick the mess.

https://www.buckles-law.co.uk/blog/lessons-in-trust-what-the-mcclure-solicitors-collapse-teaches-us-about-asset-protection/

It can be worth it, certainly it goes some way towards protecting the rights of the children particularly in the event of a remarriage of the surviving spouse so if that's the number 1 priority yes I would say it is worth it. But you've accurately identified the drawbacks in that it gives (much) less freedom and control to the surviving spouse. There are ways and means to set up the trust to mitigate this, to allow for instance for the survivor to downsize or relocate if needed, and the capital/ share of the equity that belongs to the trust either to be realized at that stage and released to beneficiaries, or reinvested either into the new property of the survivor or otherwise invested to provide them an income. But obviously it does all add complexity and requires at the least the involvement of the children and trustees (if the children aren't trustees themselves) and in the event of there being a family fallout or estrangement or similar it can all get messy.

This is my personal, non-professional opinion only, but I would say it's definitely worth it in the specific circumstance where the marital home is quite/very valuable, but there isn't very much other liquid cash / assets in the couple's estate - quite common for instance in London where people may own £1 million properties and have reasonable pensions but little else in terms of cash savings - in that circumstance 50% of the value of the house is quite reasonable to provide for the surviving spouse who can choose to either stay in the house, sell it and downsize with their share of the equity or sell it and use their money to pay care home fees, in either of the latter two scenarios the children usually get their share of the remainder at that point. But in scenarios where either the house isn't that much in the scale of the whole estate and there's plenty of available money for the first to go spouse to provide for their children without needing to use the capital in the house, or more commonly, there just isn't that much wealth overall and 50% of the house won't adequately meet the needs of the survivor, I'd say it can be an unnecessary complication. But obviously it fully depends on your own circumstances and opinions, whether for instance you do really want to rely fully on state provision of care and view that as 'winning' or keep the flexibility that having money allows but risk having less to pass on to the children.

The other thing I'd say is that the will and arrangements you make now doesn't have to stand forever, you can choose what works best now and change it again at a later date. Obviously no-one has a crystal ball but you can make some assumptions, e.g. that while you are relatively young care costs are a way away into the future and may in fact never come to pass at all, but the scenario of a premature death and one spouse being left with the care of young children and then remarriage and potentially even having additional children with a new partner is relatively more likely (obviously still very unlikely overall)... Also of course your situation may change in time in terms of what assets you have (e.g. if either of you get any inheritance from your own parents or other windfall) and what financial support you've already been able to give to your DC. So the answer could be no for now but yes later, or vice versa...

This refers to lifetime trusts; these are a very different animal to a life interest in possession trust.

I rarely recommend lifetime trusts for the reasons quoted, but life interest in possession trusts are a very useful tool for step families, couples aiming to protect the first-to-die's share of a house being used for the survivor's care fees, or couples where there's a concern that the survivor may remarry, forget to make a will, and then the children are at least partially disinherited.

It's the best option. We've done it. If you need to pay for care, you'd sell your house and only your half of the proceeds can be used for your care fees. The other half stays in trust for your children. It can't be used to pay your fees as it's not "your" money. AgeUK have brilliant factsheets about paying for care.

what if I DO need to pay for care while I'm still alive, and don't want to end up in a state when I'm elderly?

Assuming you each own 50% of the house, your 50% would be available to pay for care fees. Once your assets drop below a certain level (currently £23,250) the council would fund a portion of your care costs. If your assets drop below £14,250, they will pay all your care costs. However, your spouse's 50% of the house would not be part of the calculation, so this would eventually go to your children regardless of what happens.

What if I want to move, downsize or sell up and move into rented - will this be made really difficult?

A properly drawn up will would allow you to downsize or move into rented property at any time. If you were downsizing, all the money from the sale would be available to buy a new property, but you would share ownership of the property with the trust set up by the will so that your children ultimately inherit. If you sold up completely and moved into rented accommodation, you would be able to access 50% of the funds from selling the house, with the rest going to your children.

Is it absolutely necessary?

If you want to ensure that your children inherit from you regardless of what your husband does after you die, this is the way to do it. Your half of the house would then definitely go to your children when he dies. Equally, if he dies first, his half of the house will definitely go to your children even if you remarry and forget to make a new will.

Are there any alternatives, like leaving a chunk of money in trust instead?

You could do that, but the surviving spouse would not be able to make use of the money, whereas they will be able to make use of the house if that goes into trust. Also, the house is your biggest asset by far, so putting some money in trust for your children may leave them with a much smaller inheritance than if you do what has been suggested.

I wouldn't do it unless you have separate kids. It is much nicer for the survivor to have freedom to choose how to live their life and to spend the capital as they think appropriate including ensuring they have something for care.

My Dad died some years ago. In the meantime Mum has been able to live her life as she sees fit using the assets they had jointly built up. Mum is now in care and it is such a relief to know that there is money there to cover her for a few years. There is unlikely to be anything left, but that isn't an issue for us kids. They did their bit bringing us up and managing to provide for their old age. They don't then need to leave us money, it is for us to provide for ourselves in turn.

I wouldn't do this either. Particularly at such a young age - you may both have sufficient assets in 40+ years time to cover any care needs for either/both of you?

I wouldn’t do it at your age. Review it later. If I died my OH would have 2 young kids and he’d be fucked, frankly. I would happily allow him to control a of our assets to make the best of the situation. When you’re older, it’s probably an good idea.

Having seen how quickly many men remarry after their wife dies I’d say it’s worth considering. We had a friend who died, her husband remarried a year later and then when he died not that long after, the whole estate passed to his new wife.

She left nothing to his kids and passed millions to her own kids.

Age isn't really relevant. You can die at any age. A will giving the survivor a lifetime interest in the deceased's share of the property ensures that the children will ultimately inherit from them. The surviving partner can't accidentally disinherit the children completely by remarrying and failing to make a new will, nor can they deliberately leave the children with nothing.

The normal concern with care fees is not paying them but making sure that the entire estate is not swallowed up in care fees. As per my previous post, the council pays your fees in full once your assets drop below £14,250, so no-one will ever be in a position where they can't pay for the care they need. However, if you have to pay for care until your assets drop to this level, you are essentially leaving the children with nothing once a funeral has been paid for. If OP uses her will to set up a lifetime trust as suggested, her children will inherit at least £150k on the figures she has given (assuming she will own half of the house).

If you have young children when you die, the survivor will still be able to downsize or move into rented property. It would only be a problem for them if their own income plus 50% of the house and the right to continue living in the house indefinitely was insufficient to provide for themselves and the children.

This is just the thing I was talking to DH about a few weeks ago, we have 2 young children too.

Interesting replies, lots of food for thought

Whilst you can obviously die at any age. Bringing up young children as the only surviving parent might reasonably require more access to capital than a retired person seeing out their years. I appreciate there are risks but I wound consider my OH to need every tool at his disposal to make his life as easy as possible if I died now. I wouldn’t feel the same is our kids were 22 and 24 (not 2 and 4) when I died, for example.

Thanks for the replies, I really appreciate it. I'm still undecided! We spoke to our will person and I did feel quite reassured - though I'd have to ask my children or their trustee for permission if I felt I needed the capital for anything other than another property. And part of me does feel sad that half of the money we'd build and save together to live our lives with would not be accessible to me to use, without my sister in laws say so! Or in DH's case, he'd have to ask my parents / sister (they'd be trustees on behalf of the children if under 18).

If one of us died now, it's possible we could re marry as we're relatively young in the scheme of things. He also told us that you don't have to be married, but only cohabiting for 2 years before a new partner could make a claim on your estate in the event you died.

If this is the case, I do wonder if the surviving partner couldn't just change their will to ensure everything is left to the children once they enter a new relationship. It feels like there would be more freedom this way, but I don't know.

Really pleased to read your response @prh47bridge as this is what we have done. I am by far the larger earner, what I have worked hard for is to provide for my children. If something were to happen to me I would hate that they could miss out if my husband remarried. For us personally it seemed the best option in ensuring that our children should benefit in the future.

I think you are rather young to be considering this and from your post your house isn’t worth a huge amount. Giving away assets into a trust is not something to be taken lightly you say you are undecided do you really want to give up your freedom to trustees even if they are family. How do you know what the future will bring do you understand the full tax implications?

I do wish people who clearly aren't lawyers or will writers wouldn't post on these threads. PRH47Bridge knows what they're tallking about, I'm a will writer and a lawyer with over 30 years experience. It's annoying when people start conflating life interest trusts with lifetime trusts.

As said earlier, these are completely different things.