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modtinbasher
27th Oct 2013, 15:15
Question for any UK dwellers who understand the above.

Tinbashette and I moved house recently and following advice we bought our house as "tenants in common". This means that Tinbashette and I each own an equal share in the property and through each of our wills (when we've made them) we can each bequeath our personal half share of the property to each other upon our death, or to somebody else.

For example, should I wish to bequeath my half share to our son, then legally, upon my death, he would own half of the house. The remaining half would still be owned by Tinbashette and would remain so until her passing, then whatever bequest she had willed would be met.

If however, Tinbashette was to become unable to look after herself, could not look after the house and needed to go into social care, then it would be very difficult for the powers that be to insist the house be sold to fund said care, as half of it would be owned by No.1 son.

Well, that's what is generally accepted to happen until HM Gov move the goalposts.

Now, when we recently spoke to a solicitor regarding our plans, he said that we would have to have a trustee(s) to look after the estate for when both Tinbashette and I pass on, until the house is sold et cetera and No.1 son gets to live the high life on the proceeds!

Anybody got any views on these trustee arrangements? Do we HAVE to have a trust? Any experience on these things out there? It has been suggested that our solicitor may be over egging the trust angle to make more money! I know you are supposed to put your faith and belief in these professionals but where does one go for expert advice other than a solicitor?

Your considered help please.

MTB

OFSO
27th Oct 2013, 15:28
Yes, MTB, the older generation in my family did this. They also formed a limited company, the property is held in the name of the company, each person owns one share, and they live there as tenants-in-common. The limited company bit is simply to make ownership easier - taxes, insurance, rates etc.

But that's something else, my wife is the expert on that.

I don't believe you have to have a trustee - in the case mentioned above there isn't one. However you can appoint anyone as a trustee and provided the setting-up complies with the law (which you can google) it can be set up without a solicitor.

Just found this:


You can avoid problems, such as children forcing a sale, by willing the first half to a nil rate band discretionary trust with them as beneficiaries. You could appoint somebody other than them, such as a trusted friend or family member, as trustees.

On the first death, the trust accepts a debt equal to a share of the home worth up to the IHT threshold, which is repaid when the surviving partner dies. In effect the part of the home owned by the deceased is lent to the surviving partner until they die.

This legal move can also help with long-term care costs. As long as one of you is still living in your home the council can't include its value in the means test if one of you has to go in to long-term care.

With tenants in common, that also applies if the husband or wife still living at home dies while the other is in care, because their share goes in to the trust - the value of the home is still effectively nil.


You will need a solicitor who has expert knowledge of these trusts to set one up and advise as it can be a complicated process.

However, doing this legal move can also help with long-term care costs. As long as one of you is still living in your home the council can't include its value in the means test if one of you has to go in to long-term care.

With tenants in common, that also applies if the husband or wife still living at home dies while the other is in care, because their share goes in to the trust - the value of the home is still effectively nil.

Method

You'll have to contact your solicitor but it's quite a simple procedure. You can switch simply by writing to each other saying the property will be owned as tenants in common and then to the Land Registry.

Alternatively, you can fill in form RX1, available from the Land Registry, but it's best to have legal help to do this. You will also have to specify in your will that you intend to leave your share to your specified beneficiary.

It can cost as little as £30 for legal documents to be drawn up but if you want more in-depth legal advice it can cost more.




Note how little it "may" cost to establish a trust. I don't believe it, knowing how rapacious solicitors are. See your PM !

cavortingcheetah
27th Oct 2013, 16:01
Keep it simple and get your solicitor to change the ownership of the house to a joint one. All that is required is some paperwork at the land register and something around the £500 mark in fees.
It is perfectly possible to have gone from joint ownership to tenancy in common and then back to joint ownership depending on whose moved what goalposts where.
Perhaps you should also consider the implications of the inheritance tax band allowances as between parent and child.

modtinbasher
27th Oct 2013, 16:03
Thanks very much OFSO for your very prompt reply. I read the PM as well.

MTB

modtinbasher
27th Oct 2013, 16:07
Thank you cavortingcheetah (http://www.pprune.org/members/45053-cavortingcheetah) as well. We are beginning to wish we'd kept it simple in the first place methinks.

MTB

G-CPTN
27th Oct 2013, 16:14
I was (very) recently told (last week) by the bank that they will arrange a trust for a fee of 3% of the total value plus an annual management fee. Any additions to the content of the trust will be charged at 3%.

After seven years the contents of the trust will be beyond the grasp of UK IHT. In the meanwhile they should remain beyond the control of the donor except by the discretion of the trustees.

Whether this will work as a ruse to avoid calling in the asset to fund 'retirement care' is debatable as it can be construed as being a conscious act to avoid responsibility.

Trust law (http://en.wikipedia.org/wiki/Trust_law).

cavortingcheetah
27th Oct 2013, 16:48
You can achieve much the same result by gifting your bequest now and taking out a life insurance policy for the gross inheritance tax due were you to die within seven years. Actually it could be eight years for the time period is taken from tax year to tax year.
Perhaps if you formed such a trust with a bank, HMRC would see through the wheeze and you should think about such a life insurance policy anyway? They're not that expensive. Banks and trusteeship don't really go together for the bank will always act in its best interests.
Seek expert advice is the best advice.

OFSO
27th Oct 2013, 17:07
I've just been told that someone I know set up a system of tenants-in-common where each parent left his half of the property to one of the two children they had both had. (Father left 50% to daughter, mother 50% to son). One parent has now died and the 50% of the property passed to the child. There were no problems and they were not told that a trustee was needed.

So I'd forget about trusts for this purpose !

Message to G-CPTN and cavorting: I investigated setting up a trust via a bank about ten years ago. Their terms, charges, and conditions were unsatisfactory. There are professional firms who only do this who charge much less.

Ozzy
27th Oct 2013, 17:12
Let's say both of you are flying in a plane. Said plane crashes. No survivors. How do they figure out who died first? Somber, I know but has to be addressed.

Ozzy

Vitesse
27th Oct 2013, 19:32
We're in the throes of setting up a trust for similar reasons to those discussed above.

I'm wondering why the powers that be haven't moved to prevent this sort of thing. Is it because it's traditionally an 'establishment' dodge?

I've noticed newspaper ads appearing recently so if trusts become mainstream something will give, surely?

Mel Effluent
27th Oct 2013, 20:11
Ozzy,

I understand that the older of you is taken to have predeceased the younger.

Mel

ricardian
27th Oct 2013, 21:02
We set up new wills when we moved to Scotland because our existing wills, written under English law, were invalid. Our solicitor suggested that we also set up powers of attorney so that in the event of either of us becoming incapable of managing their own affairs (we're both in our 70s) the other partner could take over. Total cost for the whole thing was around £700 - and we were amazed that the solicitors quote at the start was exactly what we were billed for at the end. What triggered this off was the death of a single chap in a council house who had left no will and his relatives were all in their 80s, it took ages and a lot of court time before anyone could do anything about the tenancy.

1DC
27th Oct 2013, 21:25
We are getting around to the tenants in common thing, have been for a while so this thread may be trigger for us to do it.
We do have a Lasting power of attorney signed by us and the kids so if herself and i lose it the kids can manage our affairs without delay.
Our will also has a provision to cover the event of us and all of the beneficiaries of the will (effectively us and the kids) perishing at the same time. In that case everything goes to certain named cousins, god children etc..

Headstone
28th Oct 2013, 15:00
This scheme of each having half the house came into fashionin the early 2000s when Broon refused to uprate the inheritance tax threshold.The idea was that if our total assets, the largest being the house, exceededthe inheritance tax threshold then in my will I left my half of the house to myson. Then when my wife dies her assets would be less than half of what it wouldhave been so no inheritance tax money to government to squander. There is aproblem with this. After my death my married son unfortunately gets divorced sohis ex-wife demands half his assets. As this includes half the house it probably hasto be sold to pay her off. He could fall out with his mother and demand thehouse be sold to let him have his money. Importantly in my will I can’t say that I pass over my halfof the house but my wife must stay there until she dies. That is a gift withstrings and therefore null and void and inheritance tax would apply.

I find it odd that someone has said they “Had” to have a newwill made when they moved to Scotland – presumably from England by the way. Imade my first will in Scotland in the early 70s. I told the solicitor that Iwould inevitably be moving to England in around 3 years or so and did not wantto make another will when I moved. He said no problem as all wills had words tothe effect (can’t remember the exact ones) This Will Made Under Scottish Lawwhich Will Apply in Any Jurisdiction. Presumably reverse applies?

One difference in English/Scottish inheritance laws, atleast in the early 70s when I made this will, answers a question in a previouspost. If my wife and I died in a crash then in Scotland it was assumed that theMale has primacy unless the female is on life support or something and then shehas to survive for a period – again forgotten exactly how long– before her willbecomes valid.

As in all wills or legal agreements– Get a good competent solicitorwho knows about wills to write it with no ambiguity whatsoever. It is worthevery penny.

Ozzy
28th Oct 2013, 16:30
The first thing I did after my divorce was to get a new Will written up by my attorney. He gave me what I wanted and also a friend and family rate of $100. Covers all my meagre (after half of it was given to ex-wife) savings, stocks, and property. She gets nowt, the State get's its share, and the rest all goes to my kids, with the appropriate caveats.

Ozzy

4mastacker
28th Oct 2013, 18:41
A few years ago we learned the hard way when my mum went into care and she had to sell her house to pay for her care. Consequently, when Mrs 4ma and myself went to have our wills drawn up, we explained what had happened and that we wanted to leave our house to our kids. The solicitor advised us to change our status to "tenants in common" and explained about the trust thing. She also advised that we appoint our kids with power of attorney at the same time as, she pointed out, we can be struck down at any time. Good advice and the whole lot cost about £100.

Ripline
28th Oct 2013, 20:14
I am NOT a legally qualified person! But I offer the following.

Mrs Ripline and myself have recently redone our wills to reduce the opportunities for one of us surviving the other and being forced to sell the property by a local authority (as mentioned by the OP).

Just one point, though. In a Will, you can create a Trustee (say a child or other close friend) just by saying so in the will document, to hold the deceased share of the property during the lifetime of the surviving partner. That's it. No legal involvement by solicitors, banks or anyone else. This type of Trust is not to be confused with the normally understood creation of a Trust to administer property and money on behalf of a third party and is created without paperwork.

There are two separate types of Power of Attorny, Mental & Health and Property and Finance. It is a good idea to get these sorted out in advance of them being needed, assuming that your attorney(s) can be trusted! Both Powers are extinguished on death - that's when your choice of Executors(s) kicks in. Your trustees can also be your executors.

Not always recommended, but there is nothing to prevent you from doing all this yourselves using template models for the wills bit if you have very simple circumstances. The CPA documents should be well within the capabilities of the average person to register after careful perusal of the advice that comes with the application.

It has been my experience that advice from a member of the Professional Willwriting Association is well worth listening to. Their code of conduct absolutely precludes any hard-sell (including cold-calling) and they have to provide a complete list of what is provided and at what cost before the work is started.

Ripline

Ripline

modtinbasher
29th Oct 2013, 10:14
Thanks again everybody for your efforts.

Ripline you quote "Just one point, though. In a Will, you can create a Trustee (say a child or other close friend) just by saying so in the will document, to hold the deceased share of the property during the lifetime of the surviving partner. That's it. No legal involvement by solicitors, banks or anyone else. This type of Trust is not to be confused with the normally understood creation of a Trust to administer property and money on behalf of a third party and is created without paperwork".

Does the bit "to hold the deceased share of the property during the lifetime of the surviving partner" mean that this type of Trustee has some type of secure hold over the deceased share of the property even though that share has already legally passed (by means of the will) to whom the deceased willed that share to?

Thanks again

MTB

Ripline
29th Oct 2013, 13:44
Modtinbaher, (repeats IANAL statement from my first post).

The situation where the desceased party diposes of his/her half of the jointly held property is described as "held in trust" and usually sets the precondition that the surviving partner has sole use of the property until their demise. Note here that "held" does not mean "owned": actual transfer of the property and to whom is only finalised when the second partner dies. It doesn't make much sense to me to split this function. An example:

Couple D&A have two children, G&J. Their affairs are simple in legal terms and they have what are called Mirror Wills drawn up. D dies and leaves all his money and effects to A and passes his interests in the property jointly in trust to their children G&J (who are also both A & D's Executors), and stipulates that A shall be able to live in the property for the rest of her life. A has full control for the day-to-day running and maintenence of the property. A's will stipulates that her share of the property plus all her assets will pass also to G&J equally, with provision for G&J's children by their respective mariages who will inherit in proportion if either, or both, G&J predecease A.

It is worth keeping an eye out for any changes in any changes in the laws in this area of joint tenancy/tenants in common thing. I don't believe that it has been challenged yet by a local authority seeking to defray it's care costs, but I believe that surviving parters needing local authority care and whose property owning status had not been altered for decades and had assumed that just leaving "their half" automatically to their spouse would have the desired outcome have been forced to sell. Having a named trustee for half of the property theoretically stops that possibility.

Hope that informs.....

Ripline

modtinbasher
29th Oct 2013, 19:53
Thank you Ripline, I think I'm getting my head around this now. Seeing the solicitor next week, just got some more work to do on "simple" trustee duties. If there is such a thing!!

Thanks again

MTB