I’m an adult. My only parent has only just passed away. I’m the only beneficiary of dad, as his adult daughter. I’m not a Trustee. Grateful for some help with a confusing situation.
The will says the whole estate is given on trust to Trustees. It says "my Trustees shall hold the Trust Fund on trust absolutely for my daughter”
And
“To apply for the benefit of any beneficlary as my Trustees think fit the whole or any part of the income from that part of my Estate to which she is entitled or may in future be entitled To apply for the benefit of any beneficiary as my Trustees think fit the whole or any part of the capital to which that beneficiary is entitled or may in future be entitled”
His estate includes his sole house (£200k) he lived in, £500 of shares, and less than £50k of other odds and ends. I have my own house already.
So estate well below the £325k threshold for IHT.
I’m not really sure it’s a good idea to have a trust here? So what I’m wondering is:
Is this a bare/absolute will trust?
Does this trust risk IHT when we wouldn’t have any tax if it wasn’t in a Trust?
Does the CGT treatment change if the value increases since death with a Trust?
As it’s a bare trust, there’s no exit charges or ten year charges? I plan to sell house and shares in 1-2 years, and pay any CGT that arises from death to then.
I don’t have to register the trust until year 2 - do I need to file separate returns for any small income (like £15 pa from dividends) or can they go on my personal tax return?
I suspect the reason my dad made this is to ostensibly stop any future spouse or bankruptcy taking the family home. Got no debt problems and no hubby. But as I’m the ONLY beneficiary of this trust with no effective limits on what I do, I’m thinking courts would assume it’s like any other asset of mine under my effective control if I had debts or alimony to pay?
Should I try to undo this bare trust? Or is it okay to keep it as it is - ie, it won’t cost me or executors much more £ in taxes or exit fees or huge yearly paperwork over a normal direct inheritance?
This is probably just a roundabout way of saying everything is left to you. It’s not a will trust in the technical sense as you are the sole absolute beneficiary. The trust language is either there because we professionals tend to use it in wills whether or not there is a trust or because there are other trusts that would have taken effect if you had not survived your father.
Without delving into the details and complexities of trust registration, if the executor(s) can complete the administration within 2 years (as they probably should), you are unlikely to need to register anything.
In the pious hope that the HMRC people running TRS are not suffering from split personality they might be, or be made aware, of TSEM6035:
“A testator (the person making the will) often includes the phrase ‘I appoint XXXX to be my executor and trustee. I give and bequeath all my goods and possessions to the said XXXX upon trust’. Using the words ‘trustee’ and ‘trust’ does not create a trust. The words emphasise that the testator trusts the executor to discharge the duties and responsibilities of the office.Later in the will, the testator may create a trust. This has nothing to do with the earlier use of the words ‘trustee’ and ‘upon trust’.”
Rather than argue this as Andrew says you might choose to register on TRS after 2 years if administration is still not complete because you may encounter the HMRC equivalent of the legendary Cavalry Officer who was so stupid his fellow officers noticed it.
Agree with Andrew. It is as you suggest a bare trust.
The trustees take their instructions form you. If you wished you could have the assets (in particular the house) transferred from the bare trustees name(s) into your name or you could leave the assets in the name of the bare trustees for the time being. A sale of any assets could if you wished be effected by the bare trustees on your behalf or by you if you transfer assets into your name.
You as the beneficiary are liable for any tax. The capital gain on say the house would be the difference between its market value at the date of death and its value at the date of sale.
There are no 10 year or periodic charges on the bare trust for IHT purposes.
Thank you for the replies, Malcolm, Jack and Andrew. That’s really helped put my mind at ease at a difficult time. Sorry for the late reply but as you can imagine had a lot to deal with.