Setting up a trust, or giving back property

[Jopo1]

My brothers and I recently inherited my dad's half of my parent's home, which he left to us in his will in trust. (The ownership was as tenants in common)

We are now looking into how we set this up and manage the trust, and we're wondering if we can/should just give it back to mum instead!

Firstly, if it's held in trust and we inherit it when mum dies, then the trust will be liable to CG tax on any growth over £3000, which is about 2.2% of half the current value of the house, so it's not unreasonable to think we might have a CG tax bill to pay when mum goes.

Secondly, to create the trust it looks like we need to use a solicitor to get the paperwork done which can cost £1000+ (+VAT I assume) and then we have responsibilities as trustees that we need to fulfil, which seems like a lot of hassle

Thirdly, the reason my parents did this was to protect half the value of the house for inheritance should one of them need to go into a home If my mum does need residential care in the future, then we would sell the damn house and use our share to pay for a decent place where she was well cared for, anyway!

I'm struggling to see much benefit it us hanging on to the property rather than gifting it back to mum. All I see is hassle and up front cost involved. The benefit is only the protection from the risk of requiring long term residential care.

Any advice and suggestions on the next steps we should take would be very much appreciated!

(PS: there's no risk at all of having to pay IHT at any point)

Jopo1

[Kantwebefriends]

Don't rush. You may be protecting your mother from frauds and gold-diggers.

Is it a Discretionary Trust? Is your mother a beneficiary of the trust? If she is then there is no current risk of CGT because the house will count as owner-occupied. (Beware: I write as an amateur.)

If she isn't, do the Trustees have the power to add her as a beneficiary? If so, consider it.

Anyway I can't see that £1k is terribly expensive if it results in you all settling on a good scheme.

[Jopo1]

Thanks Kant

Don't rush. You may be protecting your mother from frauds and gold-diggers.

Would you mind expanding on this, as I don't understand how holding half the house protects her.

Is it a Discretionary Trust? Is your mother a beneficiary of the trust? If she is then there is no current risk of CGT because the house will count as owner-occupied. (Beware: I write as an amateur.)

I'm not entirely sure, as that wording doesn't appear in the will. She is given the right to live in it and we can't sell it without her permission, and she remains the other "tenant in common"

Anyway I can't see that £1k is terribly expensive if it results in you all settling on a good scheme.

It seems unnecessarily expensive box ticking that achieves nothing. Mum will continue to live there, meanwhile we have forked out over a grand for a bit of paper that we'll never need.
It's been an expensive 2 years.... 1 brother lives abroad and has spent a lot of money on flights visiting dad while he was ill. Other brother had to book a hotel every time he visited. We've split the funeral costs 4 ways but it was still £1000 each. I've had to cancel clients for health emergencies through dad's illness and had travel costs associated with this too.

[genou]

I'm struggling to see much benefit it us hanging on to the property rather than gifting it back to mum.
Jopo1

You've cracked it, but do not "gift it back" . Do a DoV and have the house pass to your Mum, as if that was what your Dad's will said.

[Charlottesquare]

Thanks Kant

Don't rush. You may be protecting your mother from frauds and gold-diggers.

Would you mind expanding on this, as I don't understand how holding half the house protects her.

Is it a Discretionary Trust? Is your mother a beneficiary of the trust? If she is then there is no current risk of CGT because the house will count as owner-occupied. (Beware: I write as an amateur.)

I'm not entirely sure, as that wording doesn't appear in the will. She is given the right to live in it and we can't sell it without her permission, and she remains the other "tenant in common"

Anyway I can't see that £1k is terribly expensive if it results in you all settling on a good scheme.

It seems unnecessarily expensive box ticking that achieves nothing. Mum will continue to live there, meanwhile we have forked out over a grand for a bit of paper that we'll never need.
It's been an expensive 2 years.... 1 brother lives abroad and has spent a lot of money on flights visiting dad while he was ill. Other brother had to book a hotel every time he visited. We've split the funeral costs 4 ways but it was still £1000 each. I've had to cancel clients for health emergencies through dad's illness and had travel costs associated with this too.

So does that right she currently has constitute an IIP trust?

[Jopo1]

So does that right she currently has constitute an IIP trust?

I've just googled IIP and it seems to be related to income from the trust. There is no income from the trust, so no it isn't an IIP.
This is not mentioned or defined in the will.

Jopo1

[Jopo1]

Do a DoV and have the house pass to your Mum, as if that was what your Dad's will said.

Thanks. That looks like an easy thing to do so will definitely consider that option.

Jopo1

[gryffron]

I believe this creates a “will trust”, with mum having “interest in possession” (IIP?).

Mum is thus the “beneficial owner” of the house, and thus 100% responsible for the CGT. Ie. Zero, because it is her first home. Because the trust has no right to use the house, it is not a beneficial owner and not liable to CGT.

All you have to do to register the trust is create an account at the gov website. It took me about 15 minutes. https://www.gov.uk/guidance/register-a- ... -a-trustee. It certainly shouldn’t cost £1,000.

A deed of variation to gift the house to mum is one option. Keeping half the house yourselves does protect mum against people scamming her, since TiCs all have to sign before any transfer can occur. And also you against her remarrying. No idea how likely this actually is, but my dad remarried at 76.
Whichever you choose there will be conveyancing to transfer ownership. Either dad’s half to trustees or dad’s half to mum. You could do this yourself or a few hundred for a solicitor to do it.

Gryff

[genou]

Whichever you choose there will be conveyancing to transfer ownership. Either dad’s half to trustees or dad’s half to mum. You could do this yourself or a few hundred for a solicitor to do it.

Gryff

At least in Scotland, not necessarily so. If a DoV is used, there's no need to change the title. It can be sorted out when mum's estate is settled.

[Howard]

My brothers and I recently inherited my dad's half of my parent's home, which he left to us in his will in trust. (The ownership was as tenants in common)

We are now looking into how we set this up and manage the trust, and we're wondering if we can/should just give it back to mum instead!

Jopo1

Your post is most helpful. Thank you for writing it. Sorry to read that care for your Father was a hassle.

I have recently been in the position which your Father was in when he set up his will.

It was immensely frustrating. Several advisors approached to help update our wills tried to persuade us to split the house ownership and set up a trust. In the end I had to be very firm as I could not see any advantage given our (financially comfortable) situation. This means that there was plenty of finance if a care home is needed in the future.

Cynically all I could see from their suggestions were income streams for professional advisors. And hassle for our children.

So, apologies, my post isn't helpful to you but your experience is good information for those of us in our seventies updating our wills.

I'm not qualified to advise but the DOV sounds a good idea to me. Worth terminating a trust and avoiding unnecessary expense and admin in the future.

Good luck

Howard

[Jopo1]

I believe this creates a “will trust”, with mum having “interest in possession” (IIP?).

Mum is thus the “beneficial owner” of the house, and thus 100% responsible for the CGT. Ie. Zero, because it is her first home. Because the trust has no right to use the house, it is not a beneficial owner and not liable to CGT.

All you have to do to register the trust is create an account at the gov website. It took me about 15 minutes. https://www.gov.uk/guidance/register-a- ... -a-trustee. It certainly shouldn’t cost £1,000.

A deed of variation to gift the house to mum is one option. Keeping half the house yourselves does protect mum against people scamming her, since TiCs all have to sign before any transfer can occur. And also you against her remarrying. No idea how likely this actually is, but my dad remarried at 76.
Whichever you choose there will be conveyancing to transfer ownership. Either dad’s half to trustees or dad’s half to mum. You could do this yourself or a few hundred for a solicitor to do it.

Gryff

Thanks Gryff, that's really helpful, I couldn't find the info I needed anywhere!

[Femi]

I’m in this position myself having lost my dad recently. Basically what Gryff said … a good summary of my understanding of the trust my dads will created. Mum is 80 but we will register the trust (has to be done within 2 years)