I have a client who has a beneficial interest in a property that her daughter and son in law own the legal title for. The property is built next door to her daughter and son in law’s property, and I understand that there is an agreement that one property cannot be sold without the other. My client does not want her death to force the sale of both properties as this would mean uprooting her daughter’s family.
The issue is that my client would like to ensure that the beneficial interest passes to her daughter and son in law, but she would also like to make a number of pecuniary legacies to her grandchildren. At present, there are enough cash assets to meet the legacies, but my client is concerned about not being able to meet the legacies if the cash level drops.
I have therefore suggested that she could leave a share of residue to the grandchildren instead, but this would be a share of whatever is left.
My client would like to explore whether there is any sort of trust that could be set up in which her beneficial interest in the property could be held until such time as her daughter and son in law are ready to sell their own property. When the time comes to sell the property, the legacies could perhaps be paid from the equity.
However, can a trust be created where a client only holds a beneficial interest in the asset?
I take it that the restriction on selling only one property is imposed by a third party, rather than by agreement between the client, her daughter and son-in-law. Might that third party be amenable to lifting the restriction in the circumstances?
On the basis that the restriction cannot be varied or removed, the client could gift her entitlement to her daughter and son-in-law subject to payment of the cash legacies. It will then be for the daughter and her husband to decide if they should pay the legacies out of their own resources, thus removing the ongoing liability or agree that payment will only be made when the property is sold. If they do not have the resources, it might be possible to raise a mortgage on the property to discharge the legacies.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
Typically, trustees hold the legal title to property on behalf of beneficiaries.However, there is nothing to preclude trustees holding an equitable interest in property. (without legal ownership).