Father of minor children living with their mother but unmarried.
Dies intestate and property only asset with no life policy and a mortgage remaining.
The administrator of the deceased wishes to allow mother a share of the property so the children can remain in their home. Mother may potentially have a claim under Family provision.
Is the only way to facilitate this an order by the court to vary the Statutory Trust? Any advice going forward?
Hi Lucy,
The mortgage will need to be paid off? The property will be sold?
Richard Bishop
PFEP
The Administrator wishes for the children to remain in the property. Ideally they would like the mother to take the mortgage in her own name so they can remain but cannot see a way to facilitate
this without varying the trust so that she can receive an interest in the property as a legal owner?
As the children are minors, a variation can only be made on their behalf under the Variation of Trusts Act 1958, or as a result of a successful application by the mother under the Inheritance (Provision for Family and Dependants) Act 1975. These could be costly in themselves.
If it is seen as best advice for the mother to fund the shortfall in the estate, in order to enable her to raise the finance, perhaps she might be appointed as a trustee so as to give her a legal interest and for her to personally guarantee payment of the mortgage instalments. As this will be for the benefit of the beneficiaries – to enable them to continue living in their home – the trustees might agree to reimburse her out of the proceeds as and when the property might be sold. However, it might be an idea to have a counsel’s opinion supporting that course of action, in case there should be a fall out within the family at some future date.
Whatever route is adopted, the mother should also be aware that whoever pays the mortgage may be treated as a settlor by HMRC.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
Thank you for your helpful response. Have you ever had experience of the Trustees obtaining a mortgage in their capacity as Trustees?
Lucy Leach
Where I have been involved, this has generally been through one of the mainstream banks. They don’t necessarily have “standard” documents for trustee borrowing or security, so that the paperwork provided needs to be carefully scrutinised and any relevant amendments made (e.g. in the charge form - removing the lender’s power to appoint an attorney for the borrower).
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
Can the Trustees sell a beneficial interest to the Father if he redeems the mortgage? Therefore the property is debt free and the children can remain there.
Lucy Leach
…and if they do, is there stamp duty on the assignment of the beneficial interest?
Julian Cohen
Simons Rodkin
I would imagine so for the father’s redemption of the mortgage. He then wishes to gift the beneficial interest to the children’s mother which will create a PET from his estate.
Lucy Leach