I would be very interested in opinions about this conundrum….
Husband dies and leaves standard life interest trust clause, for his share of the property, to Wife who survives. The Life Interest clause also states that on death of Wife trustees hold the property as part of residuary estate or if Wife predeceases then trustees hold as part of residuary estate.
However, the clause following the life interest declares that the trustees shall also hold the trust property for the adult son (who also lives in the house) and purports to give him a right to reside whether the Wife survives the Husband or not.
Wills are mirrored and Wife has now also died. Something niggles with me (but I don’t know why) that the right to reside can’t subsist at the same time as the Life Interest and at the point of the Life Interest ending the Trustees are told that the property falls into residue yet also told to hold it for son. There are conflicting instructions since it can’t fall into residue AND be held for son.
Can a right to reside subsist in the trust property concurrently with the life interest?
Is the right to reside a disposition for IHT or does the spouse exemption apply because she has the life interest?
Is the right to reside a qualifying IPDI or does it fall into the relevant property regime or does it simply fail?
On death of Wife (end of the trust) should the trust property from Husbands Will fall to residue?
Does the right to reside only exist upon second death when the life interest doesn’t (despite the Will saying whether the Wife survives of not)?
Any views much appreciated!
There is a conflict on both deaths, which unless resolved between the son and residuary beneficiaries, perhaps by a DOV of H’s Will if still within 2 years after his death, or by rectification, will need to go to court, or at least a senior chancery counsel, as there seems no other obvious solution.
It’s obviously a mistake (just to reassure you that it’s not you!)
I wonder if it is possible to obtain any notes from whoever prepared the will to see what they intended.
There may well be a principle that the former legacy takes precedence over the latter (so it goes to wife for life, then residue) but that doesn’t appear to have been the testator’s intention so I would feel some unease following that route without the agreement of the son.
The correct analysis will depend very much on the precise wording of the Will, but I wonder if what is intended is this:
son is to have a right to reside in the property
subject to that, the wife (if she survives) has a right to the income/enjoyment of the property (a full life interest/IIP, not just a right of residence)
subject to that, the property forms part of the residue.
This would mean that the wife’s interest was expressly subject to the son’s right to reside in the property.
Arguably, this could mean that the wife did not have a “life interest” (“the present right to the present enjoyment of the property”).
It is possible for an interest in possession to be given to two people jointly: eg “the income of the trust fund shall be paid to X and Y in equal shares” - if an IPDI, this would mean 50% of the trust fund is within the estate of X for IHT purposes and 50% within the estate of Y. However, it does not sound like that is the situation here.
It may be that the terms of the Will did not even given an IPDI to the wife, because her interest was entirely subject to the son’s right of residence. The right of residence is normally treated as an IPDI for IHT purposes. That would mean that the son has an IPDI in the whole of the “trust fund” (the property) and, when that comes to any end (eg by son moving out or dying), the wife would have had a successive life interest which would seem to be a relevant property trust, but theoretically could be a disabled person’s interest, depending on the circumstances.
If the latter is correct (wife did not have an IPDI - because she did not have a “present right to the present income/enjoyment” of the property), the wife only had a reversionary interest (which expired on her death).
That would leave the position that the son still has his right of residence (treated as an IPDI) for the time being and the residuary estate is entitled to the remainder when he moves out / dies.