Bad Will scenario, help please?

[Welsh wizard]

Okay then.

Peridot said: " Personally I’ve not heard of selling your trust share and wouldn’t be happy suggesting it, probably because I don’t know enough about it. Even if it was possible all the beneficiaries would have to agree before anything like that could happen. The inheritance tax should have been paid already if due but there may be capital gains to pay on your share when you eventually get it."

I queried a couple of points there. (With due respect, as Peridot is a solicitor, whereas I am not. On the other hand, I have some specialist knowledge and experience of this area of work.) I queried whether you need the agreement of other beneficiaries, and I queried Peridot's explanation of the tax position.

In practice, though, it doesn't matter if the course you are going to take is to raise a loan from a family member.

Hi 222,

I see what you mean now. I misinterpreted the context. You were querying Peridot's comment.

No problem. Bit sleep deprived with crap concentration lo I will research such IHT/CGT implications when the whole Will is executed, ie her death.

Thanks anyway. I would put up an ecopy of the pertinent clause of contention but it's so idiosyncratic that any of her spooks reading may know and the vendetta,for having the gall to discuss it, will ensue!

Thanks again

[Welsh wizard]

Peridot

"So is the issue over the wording of what happens to your shares if she downsized for example and funds were released or do you all have to ‘purchase’ together again ie the trustees retain the 50% share with her owning the other 50% or if the price of any new property was half the sale price then the trustees would deal with the 50% for the beneficiaries and she then owns the whole of the ‘new’ property?
I think we may all be a bit confused."


The estate in trust for my Dad follows her in proprty equity wherever she resides if she downsizes, is my understanding from the crap Will that was written. Ie the beneficiaries of my Dad's will will have 1/10th equitable interest in any property she dies in.

The issue with the wording is how any sale profit is distributed ie does she keep it all or does 50% go to my Dad's beneficiaries upon sale.

Thanks once more!

[Peridot]

Hi all,

Right trying to untangle the various bits and bobs we've been covering. Sorry will go back to basics a bit hopefully we cover it all then. Not teaching grandmother to suck eggs but bear with me.

With regard to IHT this is payable at the date of death unless there is an exemption. So for any estate left to his wife that attracts a spousal exemption and no IHT is payable at that stage. However if legacies are left to others IHT will be payable if the amount of the legacies is above the Nil Rate Band allowance in force at the date of death.

If the 'other' legacies are less than the current Nil Rate Band (NRB) threshold then no IHT to pay at that point. Any unused NRB will be transferred to the wife's available allowance when she dies, before any IHT is calculates. However on the death of his wife then any legacies that were left to people other than his wife would be deducted from her NRB allowance. For example, if father left £200,000 to people other than his wife but everything else to her then there would be no IHT to pay at that point as the amount he left outside the marriage is less than the current NRB allowance (£325,000). When his wife dies then any unused NRB from father's estate is transferred and effectively added to her allowance so in this example 325,000 (her personal allowance) + 125,000 (the remainder of any unused allowance

(325,000 - 200,000)

of your father's estate (325,000 - 200,000) = 450,000. If the estate of the wife is valued at £750,000 when she died, then IHT will be payable on £300,000 at 40%.

From your posts, I believe your father died before April 2017. If it was after that time then there is an additional NRB that can be utilised called the Residential Nil Rate Band (RNRB) which comes into play when your main residence is left to your direct descendants (including step children) This an additional allowance which is increasing each year (currently £125,000). This basically increases the available allowance before IHT is payable. However I don't think it is relevant in your situation as you said your father died a few years ago. Shout if this isn't the case and I can explain a bit more.

I hope that clarifies the IHT position? There is an issue with how the property has been left (what the trust wording is) and how the wording of the Will should be interpreted. Is this a trust that gives the wife a life interest or simply a right to reside at the property?

Going back to the legacy of your father's half share of the home. This is not held in trust for him. It is left to the children and step children with the wife having a right to reside there or (depending on the wording again) has his half share been left to the wife in a life interest trust to be held for the children? As the property was owned as tenants in common, each owner can leave their respective share (50% of the property in this instance) to whoever they choose so once the administration has taken place the property will be co-owner by the wife (50%) and the trustees on behalf of the beneficiaries (50%) so effectively the beneficiaries 'own' or have a beneficial interest in the property being an equal share of the 50% from the father's estate. The wife has also been given a right to reside or a life interest (unsure which as no will wording available) in what was the father's share of the property.

Then we have some confusion regarding the will wording and under what circumstances the trust should end and the children receive their share of the trust. In the usual course of things the wording of the trust in the Will would set out in what circumstances this happens.

What actually happens on a sale of the property will depend on the exact terms of the trust set out in the Will (known as the Trust instrument).

Without seeing the wording it is really difficult to give any pointers.

However, if we assume the wife's interest is a vested interest in possession in all the trust property ie the house, her interest will continue to subsist in any sale proceeds of the property, if the property is sold and she moves elsewhere. She could potentially be entitled to receive the income arising from the investment of the sale proceeds during her lifetime, again depending on the wording of the Will I'm afraid. If this is the sort of trust that has been created then on the wife's death, the trust property, whether it includes the property, or monies representing the property, will pass to the remaindermen (the children named in the trust). However this may not be the case if we have wrongly assumed the type of trust that has been created.

If this was a right to reside type scenario then upon sale of the property and purchase of another, if there were any surplus funds then they should be divided equally between the children/step children at that time.

The question of CGT arises depending on the type of trust that has been set up. There may be some relief available as principal private residence relief however there are certain criteria that must be met to be entitled to this, such as the beneficiary having more than a 75%. As you indicate no need to worry about that until you're a way down the line yet.

As you can see without the actual wording my hands are somewhat tied with providing guidance or pointers but hopefully we've covered all bases. Sorry I can't be more precise.

[Welsh wizard]

Hi all,

Right trying to untangle the various bits and bobs we've been covering. Sorry will go back to basics a bit hopefully we cover it all then. Not teaching grandmother to suck eggs but bear with me.

With regard to IHT this is payable at the date of death unless there is an exemption. So for any estate left to his wife that attracts a spousal exemption and no IHT is payable at that stage. However if legacies are left to others IHT will be payable if the amount of the legacies is above the Nil Rate Band allowance in force at the date of death.

If the 'other' legacies are less than the current Nil Rate Band (NRB) threshold then no IHT to pay at that point. Any unused NRB will be transferred to the wife's available allowance when she dies, before any IHT is calculates. However on the death of his wife then any legacies that were left to people other than his wife would be deducted from her NRB allowance. For example, if father left £200,000 to people other than his wife but everything else to her then there would be no IHT to pay at that point as the amount he left outside the marriage is less than the current NRB allowance (£325,000). When his wife dies then any unused NRB from father's estate is transferred and effectively added to her allowance so in this example 325,000 (her personal allowance) + 125,000 (the remainder of any unused allowance

(325,000 - 200,000)

of your father's estate (325,000 - 200,000) = 450,000. If the estate of the wife is valued at £750,000 when she died, then IHT will be payable on £300,000 at 40%.

From your posts, I believe your father died before April 2017. If it was after that time then there is an additional NRB that can be utilised called the Residential Nil Rate Band (RNRB) which comes into play when your main residence is left to your direct descendants (including step children) This an additional allowance which is increasing each year (currently £125,000). This basically increases the available allowance before IHT is payable. However I don't think it is relevant in your situation as you said your father died a few years ago. Shout if this isn't the case and I can explain a bit more.

I hope that clarifies the IHT position? There is an issue with how the property has been left (what the trust wording is) and how the wording of the Will should be interpreted. Is this a trust that gives the wife a life interest or simply a right to reside at the property?

Going back to the legacy of your father's half share of the home. This is not held in trust for him. It is left to the children and step children with the wife having a right to reside there or (depending on the wording again) has his half share been left to the wife in a life interest trust to be held for the children? As the property was owned as tenants in common, each owner can leave their respective share (50% of the property in this instance) to whoever they choose so once the administration has taken place the property will be co-owner by the wife (50%) and the trustees on behalf of the beneficiaries (50%) so effectively the beneficiaries 'own' or have a beneficial interest in the property being an equal share of the 50% from the father's estate. The wife has also been given a right to reside or a life interest (unsure which as no will wording available) in what was the father's share of the property.

Then we have some confusion regarding the will wording and under what circumstances the trust should end and the children receive their share of the trust. In the usual course of things the wording of the trust in the Will would set out in what circumstances this happens.

What actually happens on a sale of the property will depend on the exact terms of the trust set out in the Will (known as the Trust instrument).

Without seeing the wording it is really difficult to give any pointers.

However, if we assume the wife's interest is a vested interest in possession in all the trust property ie the house, her interest will continue to subsist in any sale proceeds of the property, if the property is sold and she moves elsewhere. She could potentially be entitled to receive the income arising from the investment of the sale proceeds during her lifetime, again depending on the wording of the Will I'm afraid. If this is the sort of trust that has been created then on the wife's death, the trust property, whether it includes the property, or monies representing the property, will pass to the remaindermen (the children named in the trust). However this may not be the case if we have wrongly assumed the type of trust that has been created.

If this was a right to reside type scenario then upon sale of the property and purchase of another, if there were any surplus funds then they should be divided equally between the children/step children at that time.

The question of CGT arises depending on the type of trust that has been set up. There may be some relief available as principal private residence relief however there are certain criteria that must be met to be entitled to this, such as the beneficiary having more than a 75%. As you indicate no need to worry about that until you're a way down the line yet.

As you can see without the actual wording my hands are somewhat tied with providing guidance or pointers but hopefully we've covered all bases. Sorry I can't be more precise.

Hi Peridot,

Thanks for the marathon reply! Actually my grandmother was rather inept at sucking eggs, dentures were painful!

Thank you for putting the effort into explaining the intricacies and implications of IHT. He died in 2014 and the individual legacies for each beneficiary are under the nil rate band allowance of £325k. Understood about the NRB being deducted and then transferred to the surviving spouse, good idea. She'll get some of his NRB then. (I would be specific but don't want to individualise too much, hence not wording the contentious clause, the walls have ears!) The contentious clause is open to interpretation it can read two ways. One way it suggests she gets all the profit if she downsizes and his transfer transfers to 50% of the value of the new property. So if she buys a £100k bedsit we would potential be utmost shafted! Of course she can disinherit us from her Will too.



The trust gives her a life interest, specifically. Is his half is held by her as a life trust for the children beneficiaries.

I may, if you are so willing, pm you with the Will wording if I can dig it out and get your custom take on it?

I love that legal jargon, remaindermen! Think we're in a position, due to her odious avarice, that we keep her 'sweet' hope she doesn't downgrade or right us out of the Will. Wouldn't surprise me if she did.Really think she brainwashed my Dad who was too laid back and just wanted a quiet life.

As my brother is an executor/trustee of his Will, is there anyway we can find out if she changes her Will?

All the best

Wizard!

[Peridot]

Blimey the more we dig around the more confusion abounds

Who are the trustees? Is it the executors of your father's Will? I wonder if this link would help, not recommending them just thought the explanations were quite understandable as far as substitute properties are concerned:- https://www.redstonewills.com/news/i...an-it-help-you

As far as changes occurring to her Will, this is not something any of you would be able to know I'm afraid.

A shorter one this time