I am currently preparing Wills for two ladies who own a property together. One is a spinster, the other is a widow. The property is worth about £1.2m and they have about £300K each in savings.
They currently have Wills leaving their respective half shares in a life interest trust and thereafter to different beneficiaries. This is likely to cause a large IHT liability when the second of them dies.
I was planning to remove the life interest trust and simply pass their half share to their named beneficiaries on the first death, on the basis that the survivor can rely on the fact that they own the other half (and reside there) and are unlikely to be evicted by the beneficiaries named in the Will of the first to die.
To what extent can I rely on this, or is best to include a Discretionary trust, naming the survivor as a potential beneficiary with a letter of wishes asking the trustees to allow the survivor to continue to reside in the property?
I have come across something similar in the context of a blended family where each parent’s half share was left to trustees on trust for sale with beneficiaries ( their own children respectively) having interest in residue only. Trustees were one from each side of family and so unlikely to agree to try to evict their respective parent to sell property after first death unless parent wished to sell.
I think you’d lose out in the possible CGT benefits going forward as the beneficiaries would acquire as at the date of the first to die. If they don’t live there, then there could be a chat bill down the line.
Might be less than the current IHT bill, but worth factoring in.
Only other possible risks are if those beneficiaries (of the first to die) went through a divorce or bankruptcy, then there share could be up for grabs. Might be a risk for the survivor if the Courts order a sale. Probably unlikely, but…