I am acting for the executors/trustees of the will of X which left his half of the home in trust for Y during her lifetime with provision to allow her to move. Z is the remainderman. The family home was sold and a replacement property was purchased for Y to live in.
Y is now in full time care and the trustees understand that her care is funded by the local authority. Z has always been a financial dependent of X and Y and lived with them rent free at their home and subsequently lived with Y when the new property was purchased.
The trustees have taken the view that Y would wish Z to continue living at the property rent free and to that end, the trustees have not charged Z a rent on an understanding that he took on the expenses associated with running the property and maintaining it to a reasonable standard etc.
This in turn means that Y is not obtaining a financial benefit from the trust in a traditional sense although it does allow Y to continue supporting Z in the way that she had always done.
The trustees now wonder whether they have an obligation to report to the local authority that there is a life interest trust for Y’s benefit of which she is not obtaining a monetary benefit. Y does not have sufficient capacity to enable the trustees to take instructions from her about the matter.
The trustees also have concerns about whether they may be held liable for any contribution to care that Y should have been making if she were to receive a monetary benefit from the trust assets in line with a traditional life interest trust.
Does anyone have an opinion about whether the trustees have a duty to disclose to the local authority that the trust is in place but the trustees have made the decision to benefit Y in a non-traditional way. Also, should the trustees consider charging Z rent at a market rate rather than take the view that they are benefiting Y indirectly by allowing Z to remain in rent free occupation of the property?
I don’t even know where to start with researching this so any guidance or opinions would be very much appreciated.
Masefield Solicitors LLP