Property Trust and occupation by non life tenant

Trusts Discussion
1

I have recently been presented with a tricky situation which I would appreciate thoughts of forum members. Not easy to explain so please bare with me.

Last I year I acted in estate of W with Life Interest in half house. Now complete with Trustees on Title etc. Should add, I have not been instructed yet.

H is LT and is in his 80s. I have been approached by Hs daughter and the co-trustee of Ws Will (H is the other Trustee in Ws Will) as H wants his nephew and nephew’s partner to move in with him. Neither H or the nephew have contacted me directly and I understand it has been set for them to move in by mid-March.

H has told co-trustee and his daughter he wants nephew to be able to remain in the property for up to 5 years after he dies. Initially talk was of one year.

There are 9 remaindermen in Ws Will Trust, inc the nephew for an approx 6% share. (Different remaindermen in Hs Will)

Co-trustee and Hs daughter (who lives many miles awa) appreciate H is lonely. Although H has capacity, he displays a very lackadaisical attitude to most things (as I found out when dealing with Ws estate). Despite H having capacity I believe there is an element of vulnerability. Co-trustee has suggested he believes H may have a new Will drawn up, likely to benefit the nephew.

Initially I thought having an agreement drawn up with H and H and Co-trustee re: the Trust and nephew stating terms i.e. one year before moving out. I was not comfortable with that but less so now talk is of 5 years.

The co-trustee is concerned re: his obligations to the Trust. Can he effectively put a stop to the proposal? (which he would be reluctant to do as appreciates H is lonely). Or can he insist on the parameters as Trustee i.e. one year as suggested above.

Then I started contemplating the tax position as nephew not a Trust benef so no CGT PPR relief after H dies. This led me to wonder whether a DT could be put in place with nephew as potential benef so PPR applicable? Though this require amending the Property Trust, if indeed that is possible.

As you can see, it is a difficult situation and one I am struggling to find a way forward.

Thoughts, suggestions etc appreciated as always.

2

Replying to bump this back up,. Any thoughts would be greatly appreciated.

3

The trustees have legal obligations to the remaindermen so (unless there is a power of appointment of some kind) they don’t have any discretion. By default, they would have to ask any occupiers to leave the property following H’s death so it can be sold for the remaindermen or (potentially) transferred to them with vacant possession.

I would have thought that the co-trustee can only depart from this with the agreement of the remaindermen. The remaindermen may accept a year (not least because it would reduce the risk of litigation) but may not, and ultimately it is up to them whether to accept 5 years. Any agreement would have to be documented in writing, either by a formal variation of the trust (nb I don’t mean s.142 variation) or a letter from each consenting to the property being retained for five years and nephew being allowed to occupy it rent free.

I don’t think the co-trustee should feel the need to push the proposal, or even necessarily get involved until the other parties have agreed something (although it may be in his interest to see a compromise in place before H dies or loses capacity). He certainly has no obligation to pursue a variation.

Andrew Goodman