Family Trust established 9/8/2015 - trust fund of the interest of the Settlor in their main residence property. Land registry updated to reflect the trustees as the owners (trustees are Settlor’s wife and daughter)
Deed of amendment to the Family Trust 22/5/22 - bringing in asset allocations establishing an NRB Fund and RNRB Fund to ensure the estate is able to benefit from the RNRB.
Last Will & Testament (also dated 22/5/22) states that 'Upon death, I give my interest in “the property” free of any inheritance tax to my Trustees, with any charge or mortgage, together with any related interest or expenses, to be pad by the recipient to hold on the terms of the following Property Trust:
To allow “the life tenant” to live in the Property free of rent during the Trust Period.
Settlor died 17/7/22
Executors of Settlor’s Will have been advised by the Estate Planners who drafted the deed of amendment and the Will that “it is my belief that the house should not feature in the list of assets for Probate purposes”.
I’d be interested in other people’s views on this please - should the house appear on the list of assets and should it be included for IHT purposes when valuing the estate?
Afraid I can’t make much sense of this (perhaps because it’s such a mess) but:
If the property interest was successfully transferred into trust then the settlor was no longer the owner
It is difficult to see how it would not be both a chargeable transfer and a GROB therefore to be included in the gifts/GROB section.
You might want to suggest the estate planners put their insurers on notice - although the problem with all these things is establishing loss other than the no doubt generous fees they were paid to make a mess of things. If spouse exemption has been lost, causing IHT, that may be a claim.
Advice by so-called Estate Planners truly shocking…I do not understand on what basis they claim to advise that property does not form part of the estate when it is a settlor-interested Trust / GROB (I assume the settlor continued to reside in property)
The estate planners seem to be reading from a different text to me as, if the Family Trust was established in 2015, unless it was a disabled person’s trust it will have been subject to the IHT relevant property regime. The deed of amendment in 2022 would not have converted any interest the settlor had in the property into a qualifying life interest so as to enable a claim for RNRB to arise. As the gift into trust was in 2015, neither is down-sizing relief available, even if the property might have been “closely inherited” as a result of the settlor’s death.
Did the estate planners also advise on the creation of the Family Trust in 2015? If so, I wonder if there might be scope to challenge the advice at that time as it has deprived the widow’s estate of the ability to claim the full (or any?) transferable nil rate band.
Unfortunately, I believe this type of arrangement is promoted in far more situations than might be appropriate.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
If this was a Lifetime Settlement of property was the Deed of Amendment intended to pass the property back to the Settlor so as to form part of their estate from the Trust so the Will could take effect? Need to see the wording
If the property was in trust and still is then it does not fall under the Will to be disposed of unless the trust was varied/wound up and given back to the Settlor (which they appear to have tried to do given the life interest being included in the Will).
if still in trust even if not in the testator’s estate for probate purposes it will be for IHT purposes given they are living there unless paying full market rent (GROB). Is the trust discretionary in nature?
Definitely advise them to take advice re the drafter of the original trust, updated Deed and Will as they do seem to conflict.
Not at all clear, but if this was a lifetime settlement, as mentioned by Maria, what arrangements were made by the Settlor in arranging to give away his interest and yet retain occupation?
The Deed of Amendment may well have been to correct this error, as the wording meets that need and restores the RNRB that would have been lost.
The home being owned as tenants in common, then the 50% owned by the deceased is stated in the Probate application.
Unfortunately there were far too many Financial Planners that did not understand the Trust side of the arrangements they are selling, thereby causing a great deal of confusion.
I am perplexed by SeniorSam80 asserting that the deed of amendment “restores the RNRB”.
The settlement is a lifetime settlement made post 21 March 2006 and so will fall into the IHT relevant property regime (unless it creates a disabled person’s interest). Any subsequent change cannot create a qualifying interest in possession for the purposes of RNRB. Surely, even a court sanctioned rectification cannot “restore” RNRB for a lifetime settlement unless it creates a disabled person’s interest.
Whilst in my previous post on this subject I had commented the downsizing relief would not be available, I now recognise that as the gift into trust was made after 7 July 2015 downsizing relief is available to the settlor’s estate (and has been since the date of the settlement) provided that his estate is closely inherited (or at least an appropriate portion of it). However, this does not “restore” the RNRB.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
Apologies Paul, I have assumed that as the settlor made a lifetime gift of their ownership of the residence to a Trust, that action lost his RNRB. The following Deed of amendment was to return the allowance. Apologies if this was incorrect.