Looking for some advice about a house trust after fathers death

[Ethel Street]

The type of Will Trust that you describe is common in principle but can be complex in practice (especially for tax) so I agree that you need to consult a solicitor specialising in wills, probate and trusts (not all firms of solicitors have such a specialist). 

I've twice been Executor in a Will that established a Trust. In both cases we had advice from a specialist solicitor. In one case the Will Trust needed to be registered with HMRC, in the other (the case which was similar to the one here) it didn't.

So sharing my experience, and what I learned from the solicitors advising me in the past (but not giving expert advice)...

Will Trusts do not usually need any other documentation or 'setting up'. The Will, as long as correctly drafted, is also the "Trust deed" that sets up the Trust and nothing else is needed. The Trust then automatically comes into effect on the death of the testator. The Will needs to state who the Trustees are. Commonly the Executors are also the Trustees in the sort of Trust described here but the Trustees can be different people. Does the Will say something like "I appoint ...X... and ...Y...  and ...Z... ("my Trustees") to be the Executors and Trustees of this my Will"? Or are the Executors and Trustees named separately and aren't all the same people?

Registration of Trusts is usually only required for tax purposes, ie registration with HMRC's Trusts and Estates department. There is nowhere that holds a register of Trusts in general. Not having registered a Trust with HMRC is unlikely to invalidate the Trust as such but could get the Trustees into trouble and expose them to penalties with HMRC for non registration. 

Not all Trusts have to be registered, for example Trusts that are unlikely to produce any taxable income or capital gain. The Trust you describe here may fall within the category of Trusts that don't need to be registered (only may - take advice). See the seventh bullet point under the heading "If your trust is not liable for UK taxes" here: Trusts and taxes: When you must register a trust - GOV.UK (www.gov.uk)

It sounds like your dad's wife is one of the Trustees (and an Executor?) and believes, or has been advised, that the Will Trust needs to be registered with HMRC so is taking steps to do that on behalf of all the Trustees. DoB and NINO of all Trustees is information HMRC will require. The implication is that there may be some tax to be paid, possibly CGT from the date of your dad's death to date of sale, but you would need a Trust taxation specialist to give you advice on that. And maybe a late registration penalty. (I have learned that the taxation of Trusts is horribly complex!)

I believe HMRC will require all the Trustees named in the Will to sign the HMRC form registering the Trust, although mostly when I was involved HMRC subsequently dealt only with me as the "Lead Trustee", ie the person authorised by all the Trustees to act on their behalf.

If the three of you are the Trustees named in the Will then I would expect it to need the agreement of all three of you to sell the house, subject to any specific provisions of the Will.

Hope that's of some help.

 

 

[Ethel Street]

I don't know much about Lifetime Mortgages and we don't know what the rest of the Will says, who owned the property at the date of your father's death or even if she is an Executor so I can't give any specific advice and agree with lolerz that you should discuss this with the soliciitor.

What I understand a lifetime mortgage to be is essentially a loan facility secured on the property from which you can borrow money which is repaid from the sale of the property when you die. So a type of Equity Release. So if you are going to sell the house soon then I would anticipate that the loans she has taken will have to be repaid from the sale proceeds. That will reduce the amount left in the Residuary Estate and so the amount the beneficiaries will inherit. She may be able to transfer the loans to the new house she is moving to with her new partner - if she has any ownership in it....

Whether you can adjust what she receives from the Estate to take account of the loans she has taken out is something you need to take legal advice on. It depends, for one thing, whether she is a Residuary Beneficiary at all. Is she? And is she an Executor? If she is she could obstruct your attempts to reduce her share of the Residuary Estate. You have Probate presumably. Is she named on the Probate document as an Executor?

I would question whether she had the right to borrow further money under the lifetime mortgage after your father's death if the house had been owned solely by your father. It could even be fraud because you can generally only borrow secured on property that you own, not on property owned by someone else (at least not without the owner's consent). I wonder if she has told the mortgage company that your father has died?

The Will Trust appears to say that from the date of your father's death the house is legally owned by his Trustees. She is one of them but that doesn't give her the power to act unilaterally and take out further loans. And in any case Trustees have to act in the best interests of the beneficiaries as a whole and I believe Trustees are forbidden by law to use Trust assets as security for their personal benefit. These are potentially serious criminal offences, I wonder if she realises that?

It might be legal to raise a loan secured on the house to carry out repairs but (a) that would have to be a decision of all three Trustees and (b) it would be done only if the repairs could not be paid for from other Estate assets.  Surely if the repairs needed were so large that a new mortgage loan was needed you would have known about the condition of the house?

Who was the registered owner at the Land Registry at your father's date of death? Is it now registered in your three names as Trustees? It might be worth you getting copy of the Title document for the house from the Land Registry to show the solicitor. It costs £3 and you get a downloadable pdf. Search for land and property information - GOV.UK (www.gov.uk)   It's only the Title Register you need to get, you don't need the Title Plan. If it's the first time you've used the Land Registry site it will ask you to set up a (free) Land Registry account before you can do the download.

I think you have uncovered a serious issue here that needs professional legal advice. 

Incidentally, I assume you are an Executor so do you have a copy of the "life time mortgage ... that her and my dad opened before his death"? As Executor you have it because the liabilties your father incurred under it are part of his Estate. Ask her for a copy.
 

[Ethel Street]

This gets more complicated every time you post!  Do you mean that she was registered as sole owner some years before he died? That he had gifted her the house but continued to live in it with her?  How many years before his death was the house transferred to his wife? I find this confusing, I am not going to try to guess what was going on. You will need to do research and discuss with the solicitor.

It is possible to get the previous ownership records but I've never done it. Call Land Registry customer services for advice.

But if she was the sole owner of the house before he died I'm not sure how it can form part of your father's Estate at all, or how it can now be held in Trust under the Will. 

 

[Ethel Street]

I can't really offer you any more advice on this, you need to discuss with the solicitor. Getting the previous title register records will be helpful and may show whether before death they co-owned as Joint Tenants or Tenants in Common. Form DJP can be used for either type of co-ownership. The information on LR ownership puts a different light on whether she is legally entitled to make further draw down borrowings from her share of the ownership.