Would anyone be able to help, please.
Married couple wish to leave life interest (of residue) to spouse with children as remaindermen in equal shares. Two investment properties currently owned as joint tenants are mortgaged (interest-only). There is no life insurance in place to pay the mortgages on first death.
I have found authority on mortgaged property in relation to lifetime trusts, however not on will trusts.
Are there any pitfalls in setting up such will trust including the 2 mortgaged properties?
Thank you in advance for your kind support
Forest Wills & Estate Planning Ltd
I assume the joint tenancy will be severed so that the will trust will include a half share of each property (subject to the mortgage). While there is no objection in principle to including a trust in the wills, it is worth thinking in advance about how the mortgage repayments will continue to be made (assuming the trust will not have access to any other funds and that the lender allows the mortgages to continue). The trustees will only be able to pay the interest element of the mortgage payments from out of rental income, leaving someone else (presumably the widow/widower) to make up the capital element. That could be classed as a loan, a capital addition to the trust, or a payment entitling the widow(er) to a greater share of the properties. Each in turn gives rise to further issues.