Practicals of Trust setup by Executors

Hi, I just want to get my head around how a trust is physically setup after the Testator passes? Specifically for a Severance of Tenancy so the split is registered properly? Had a client who apparently didn’t do anything so the survivor was unfortunately able to change the property to a sole name after Mr has died (following advice from equity release company). Essentially what should the Executor have done?

More detail needed to reply fully, but if you mean that a severance of tenancy of a trust of land [ie any joint ownership] was effected before the death then the trust of land would have continued with the surviving trustee(s) automatically becoming the new trustee(s). This is completely separate to any trust which may arise under the deceased’s will or intestacy.

Hi Mullenky,
The situation is Mr & Mrs set up a Will with Trust in 2013. This included a Severance of Tenancy. Mr passed in 2014. Mr & Mrs had also taken out an equity release in 2010. Property current value £700k, equity release approx 250k.

In 2016 for some reason, Mrs got in contact with the equity release company to ask for a further release of ~£2k even though she hadn’t spent much of the original release.

The company advised if that’s what she wanted the property would need to be in her sole name. She spoke to her solicitor who pointed out that a trust was not set up as far as she could see and asked to confirm this. We don’t know yet if they received a letter about this. The solicitor went ahead and turned it into sole ownership.

Now of course the SEV is removed she is potentially liable to care home fees and she is in her first month of a care home. She has no recollection of what happened in 2016. I know this approach isn’t a guarantee of protection but she and her children haven’t got it now at all.

Essentially I’m wondering on the practical front what the executors should have done to “set up the Trust” or as the SEV was in place, this was automatic? Or do they need to do nothing?

Rugby Wills

Also if there’s anything we can do as the beneficiaries potentially can lose £300k?

What did Mr’s will do with his share of the property?

If it was subject to a life interest for Mrs, then as the sole surviving trustee of land she held the beneficial interests for herself and her late husband’s will trust.

If that is the case then, despite the title being registered in her sole name, she only owns a half share of the property. If, somewhere along the line she has made a declaration that she is the sole owner, both legally and beneficially, in itself that cannot destroy the trust’s interest. If she is also the sole trustee of her husband’s will and it includes power to appoint capital to her, it might be that she has effectively exercised that power. However, was that done under a mistake and is, therefore, open to being rectified.

Perhaps a review of both the husband’s will and the file of the solicitor who advised in 2016 should be made to understand the facts and what should have happened.

I think it’s fair to say that equity release schemes and life interests under wills are not easy bed-fellows.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals

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It seems likely that nothing was done when Mr. died, possibly as no other asset holders requested Probate. I’d stick my neck out and suggest the widow and children (most likely all exors/trustees) either didn’t seek professional help with the estate, or did and decided not to take it up (believe me it happens!).

As for the solicitor who removed the restriction, they may well have been a Conveyancing Sols so didn’t appreciate the terms of the Will (this happens too). Also a very good chance they weren’t shown the Will if the widow only explained the Equity Release requirements when instructing the sols w/o appreciating the significance of the Will. Clients frequently misunderstand these Wills when the first dies - I’ve seen many clients over the years who think the half passes straight to their kids, or even to them as survivor.

Course, I can’t be sure but seems likely the family didn’t seek the right advice or simply ignored it at the time (I have a number of matters currently when the spouse died several years ago as the survivor didn’t think they needed to do anything).

My view is on first death Probate should be obtained and the Title updated either with a Form A or Form B restriction. This is a belt and braces approach and I am aware some don’t believe Probate is essential.

I agree with Paul as despite the sequence of events, the trust aspect in the Will may well be rectifiable albeit not as straightforward as it could have been. I’d certainly submit the Will to the local authority who may accept that as demonstrating the intention and disregard half the house.

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You can presumably still file a Form A restriction on the basis one half of the property is still owned by the will trust. (I should caveat that I have little to no knowledge of conveyancing so don’t know if a charge would prevent this).