How can I secure my late sister's estate for her sons

[LynG]

This is my first post, so I do hope I have placed this in the correct section.

I bought a house with my sister in 2013. I owned 55% of the house, and she owned 45%. My sister died in 2023, and in her will left her share to me, wanting her share to eventually, on my death, go to her 2 sons, split 45/55% respectively. Therefore, as it currently stands, the house is in my name in its entirety. My will was written in the same way. We did this to protect the remaining sibling from losing their home. We held a Declaration of trust and were Tenants in common. I have recently rewritten my will in a way that, fulfills my sister's wishes for what was her portion of the house and likewise covers my wishes for my original percentage.This is my current situation and whilst that's all perfectly acceptable to me in my current circumstances I have a worry regarding my nephews inheritance. In that, her remaining estate would have gone to them on their mother's death had we (my sister and I) had not bought a house together 11 years ago.

My worry concerns my possible future care costs. I am currently totally independent and of reasonable health for my age. If my original 55% of the house should ever have to go in care costs, so be it, but I don't want my late sister's 45% portion to go on my care. I want that to go to my nephews. I understand in how it stands at the moment, the whole house would go to my care, if necessary, because it is currently 100% my home.

Is there any way I can secure the 45% of my house for my nephews, say by creating a Deed of Gift? Or, could one of my nephews (son A) buy the 45% from me, giving/gifting his brother (son B) the equivalent of his share in 'cash'. Could I then gift the remainder of the 45% paid for part of the house back to 'son A'. This way, if allowed, would give my nephews their inheritance now, and my share will be resolved at my death.

I understand there could be inheritance tax implications if I (or the/any gifter) dies within the 7 year rule. I am also happy that if it becomes necessary my money should go to my care costs. I am just not happy that as it stands my sister's old estate would also be taken should I enter care.

I write asking for some advice if there is a way of managing this matter legally before I go to a Solicitor and end up with a bill, but to be told there's little that can be done. I am a pensioner myself.

Any advice on what I can do legally would be very much appreciated.

Thank you,
Lyn

[Pezza54]

Hi
Welcome to LB

The wording of the Declaration of Trust that you and your sister signed is all important. If it was drafted correctly you should not be the owner of your sister's 45% share. You or the executor of your sister's will should be the trustee ensuring your nephews receive their share when the property is sold.

You stated that in your sister's will she left her share of the property to you. Do you mean as trustee?

If you don't own 45% of the property, only 55% of the value can be included in means testing for self funding care costs

[LynG]

Pezza,

Thank you for your response above. I am confused and to be honest always have been. Wills as written when we had our original ones created are not the easiest document to understand. My new will makes much more sense to me. I digress.

My sister's Will stated the following;

"I GIVE all my share and interest in the freehold property known as X XXXXXXXXX, XXXXXXXXX, XXXXXX and registered at the Land Registry under title number XX123456 ("the property"} and its remaining contents to my sister XXXXXX as aforesaid absolutely PROVIDED THAT if XXXXXX as aforesaid shall predecease me then it is my wish that the property be sold and the net proceeds of sale be held upon trust to divide the same into one hundred (100) equal shares and"....
it then goes on to split the 100 shares between her sons.

I would add that my will was almost identical, just swapped names around.

The Declaration of Trust decribed the cost of the property and how much each of us paid toward its purchase and went on to discuss what the Deed witnessed

" A (me) and B (My sister) agree that they hold the property in trust for themselves as tenants in common in unequal shares.

A and B shall hold the residue of the net proceeds (such as net proceeds being defined as the balance remaining following the payment of agency costs, legal costs and surveyours costs (if any) and other costs of the sale process of the sale of the property upon trust.

a) To pay the agency costs, legal costs and surveyours costs (if any) and other costs of the sale process to the intent that these costs be shared equally between the parties hereto.
b) To divide the remainder of the net proceeds of the sale into the following proportions and to hold 55% in trust for A and as to remianing 45% in trust for B."

It then goes on to cover the cost of possible repairs and that the above percentages would dictate how much each of us paid towards such costs.

It then also covers what would happen should either of us wish to sell our portion of the house and the notice period we would need to comply with. Or how we would manage to buy the other out. Obviously, this was never an issue as we remained happy as things stood.

I was told by my recent solicitor who rpoduced my new will that the quote as shown above from my sister's will, means the house is mine in its entirety and they are currently ensuring that this is recorded with Land Registry.

So, does this information change what you've suggested above?

My apologies, I didnt know how much information to add to my first post and i realise that without the full paperwork to hand it is difficult for anyone to give exact advice. Your help and patience is appreciated.

[Pezza54]

Yes it does
Your sister didn't secure her sons share of the property in her will when she passed full ownership to you. There is nothing to stop you changing your will if you fall out with your nephews. They may be aware of this and unhappy about this possibility.
Speak to your solicitor about gifting a 45% share to your nephews and making them joint tenants in common. You should also enquire about life interest to prevent them evicting you to sell the property.
As your sister passed away less than 2 years ago you could, as the only beneficiary, make a deed of variation to her will
Keep copies of the wills to show the LA if they try to claim you made a gift of the property to avoid care fees
The boys may be liable to pay CGT when the property is eventually sold.

[LynG]

Yes it does
Your sister didn't secure her sons share of the property in her will when she passed full ownership to you. There is nothing to stop you changing your will if you fall out with your nephews. They may be aware of this and unhappy about this possibility.
Speak to your solicitor about gifting a 45% share to your nephews and making them joint tenants in common. You should also enquire about life interest to prevent them evicting you to sell the property.
As your sister passed away less than 2 years ago you could, as the only beneficiary, make a deed of variation to her will
Keep copies of the wills to show the LA if they try to claim you made a gift of the property to avoid care fees
The boys may be liable to pay CGT when the property is eventually sold.

Again, thank you so much Pezza. Can I ask one more question?

If I do as you suggest and make both boys Tenants in Common, would it be possible for one of the brothers to 'buy' the other out. That way ownership would be between just myself and one nephew. I would assume from what you also mentioned about Capital gains tax, that it may be payable by whichever brother sells his share, if that were the case?

I very much appreciate your helpful advice on this matter.

[Pezza54]

Yes one of the brothers can buy the other out.
I did say CGT may apply. It depends on the value of the property at the date of death if a deed of variation is made or at the time the share is gifted, and the value of the share when the property is sold.
The brother that retains the share may also be liable for CGT if he doesn't live at the property as his main residence for at least 2 years before it is sold