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Property Trust Will
Jeff Liddiard
Posted: 14 June 2018 09:55:07(UTC)
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Have any of you done a Property Trust Will? and what are the advantages?
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Guest on 18/06/2018(UTC)
Samual Saunders
Posted: 15 June 2018 09:38:11(UTC)
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The main advantage is protecting at least half of the family home to be passed on to the children. Making sure that the family home is owned as Tenants in Common and not joint ownership is essential. Then on the death of the first, rather than pass all assets to the surviving spouse, the half of the home owned by the one who has died passes to a Trust with trustees being the rest of the family.

The surviving spouse has full access to the home, can move or whatever with the Trustees approval, but if eventually, the surviving spouse has to go into care, the Trust assets cannot be touched as they have been 'ring-fenced' by the Trust.

Our Wills have been written this way and if there is a large gap between death of the first and second, half of any additional growth in property value would be protected.
Sam
4 users thanked Samual Saunders for this post.
Mike L on 15/06/2018(UTC), Jeff Liddiard on 15/06/2018(UTC), t s on 16/06/2018(UTC), Haleric on 17/06/2018(UTC)
Jeff Liddiard
Posted: 15 June 2018 11:18:32(UTC)
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Samual Saunders;63896 wrote:
The main advantage is protecting at least half of the family home to be passed on to the children. Making sure that the family home is owned as Tenants in Common and not joint ownership is essential. Then on the death of the first, rather than pass all assets to the surviving spouse, the half of the home owned by the one who has died passes to a Trust with trustees being the rest of the family.

The surviving spouse has full access to the home, can move or whatever with the Trustees approval, but if eventually, the surviving spouse has to go into care, the Trust assets cannot be touched as they have been 'ring-fenced' by the Trust.

Our Wills have been written this way and if there is a large gap between death of the first and second, half of any additional growth in property value would be protected.
Sam


Thank you Sam. That is how I understood it, but hadn't thought about the additional benefit of your last paragraph!.

Samual Saunders
Posted: 15 June 2018 13:31:41(UTC)
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Hi Jeff,

Depending on the 50% value of the property, if that were lower than the potential saving that is being looked at following first death, the Wills could say that the property and/ + ? is gifted in the Trust. That makes it a more attractive saving then and in the future, but only up to the nil rate band allowance.

If ''other'' assets were in the Trust, it is up to the Trustees to allow loans or gifts from that Trust to 'whoever'.

Therefore, let's suppose that Mr was expected to roll off his perch first and Mrs had loads of investments that she could manage comfortably on for her lifetime with your pension and hers, then a lot more of the assets of Mr could be sheltered up to the nil rate band allowance.

If you are not aware of it, also consider the annual gifting allowances and other sheltering actions that can be taken to reduce future taxes.
Sam

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Jeff Liddiard on 15/06/2018(UTC)
Jeff Liddiard
Posted: 15 June 2018 14:47:44(UTC)
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Sam, thanks for the additional information, very useful. All I have to do now is find solicitor with will-writing experience or a 'Professional Will Writer' locally (Stockport area). Need to ask around as I like to go with recommendations.
Bellabeck
Posted: 15 June 2018 14:54:33(UTC)
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take care with the newish RNRB allowance and IHT, we have recently had my parents wills changed so that direct descendants inherit from each parent as if money left to Trust (as before) then RNRB allowance cannot be applied.

take professional advice from your Solicitor.
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Jeff Liddiard on 15/06/2018(UTC)
Jailesh Patel
Posted: 15 June 2018 15:03:48(UTC)
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Agree with the last comment. These are perhaps not as useful as they used to be as IHT allowances unused by the deceased spouse can now be transferred to the surviving spouse. Also if the value at death is more than the IHT allowance then tax will be due. Finally bear in mind that as tenants in common if one end up in a care home etc then your share of the house can be used to pay for the fees. Think hard before you jump into this.
Samual Saunders
Posted: 15 June 2018 16:11:17(UTC)
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Jeff,

Get a solicitor that is STEP qualified only. Many solicitors do not have enough knowledge in this particular area. Here is a link that may help you. Remember, keep the Trustees as 'family' to administer the Trust as you don't 'need' a professional. Investments in the Trust, if applicable, should be growth and not income producing to save tax. Funds do well.

https://www.step.org/member-directory in general

Stockport area https://www.step.org/sea...ntry%3AUnited%20Kingdom

Sam
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Jeff Liddiard on 15/06/2018(UTC), Jon Snow on 15/06/2018(UTC), AJW on 19/06/2018(UTC)
jeffian
Posted: 15 June 2018 22:44:02(UTC)
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I know this is going to sound churlish but I have a bit of a problem with the concept that someone who has amassed assets during their lifetime for security in old age should seek to pass them on to the next generation and expect the state to fund their care and accommodation in their final years. There are obviously grounds for expecting healthcare in old age but why should you expect the state to house and feed you if you have valuable assets just so you can leave them to the next generation? I have been in this position recently with several members of my family, all lucky enough not to require state aid, and in the case of a wealthy aunt who lived to over 100 and required quite intensive nursing support, it used up all her substantial assets leaving little or nothing for her next of kin, but that is what it was for, surely?
Samual Saunders
Posted: 16 June 2018 06:51:24(UTC)
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Setting up Trusts has been in operation for hundreds of years to protect assets for future generations and the majority of the wealthy families in this country have Trusts in place and keep them going for future generations This facility is available to everyone who seeks to plan for the future.

When a Will is drawn up that states a Trust will be put in force on the death of a person to protect part or all of his/her assets there should be no thought that that person will in fact need health care than cannot be paid for. In fact if it can be shown that the settlor would likely need such care, then the Trust will not protect his/her assets from meeting the costs and could be claimed against. Therefore, in making these arrangements, any future care costs that may be needed, have most likely been considered.

Assets settled in a Trust are managed by the Trustees, ideally family members, who, collectively, can make whatever arrangements they see fit in managing that Trust. This could include loans to the surviving spouse, repayable from their estate when they die. This facility could be used to help meet care costs if necessary, but protection of the nil rate band allowance is the right of us all and a Will can do this and avoid having to sell off the family home just to pay for care.

I do not agree that there are ground for expecting healthcare in old age. Yes it is a possibility, but not always. In my opinion, taking care of your spouse and family should always be the first consideration for husband and wife and making a Will that deals with this should be something that is considered early in a marriage. Unfortunately, most think there will always be time to make these arrangements in the future and often there is not time.

Probably a good percentage of people reading this will not have made a Will and should do it without delay and review it regularly.

Sam

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Jeff Liddiard on 16/06/2018(UTC)
jeffian
Posted: 16 June 2018 18:51:08(UTC)
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I have no problem with Trusts per se - I have used them myself both as a beneficiary and a donor - but I thought that the reference to "Property Trust Will" related specifically to sheltering the asset value of your property so that it couldn't be taken into account when assessing whether you qualified for state support when seeking state funding for old age care. If that wasn't the purpose of the question , then I'm sorry I misunderstood.

As for healthcare, my comment related to the fact that we are all entitled to NHS care so might reasonable expect the 'health' side to continue to be state-funded but if you have to move into a nursing home, I don't see that it is the state's job to pay for accommodation and food any more than if you decided to move into a hotel when younger! It was interesting that Theresa May got into a complete mess over attempts to set a generous 'cap' on care charges and even odder that there was an uproar - including from Corbyn - about the eminently sensible suggestion that the ludicrous 'Winter Fuel Allowance' should be scrapped for some people. If you need state support, it should be provided, but if you are well-off enough to pay for these things yourself, then you should IMHO.
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Michael Loveridge on 18/06/2018(UTC)
Samual Saunders
Posted: 16 June 2018 20:26:32(UTC)
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The Property Will Trust is to shelter a person's residential value within the nil rate band allowance and pass that asset to beneficiaries. If the property value were below that allowance, then additional assets could be added if available.

The Trust is not 'specifically' to avoid care costs because if any action is taken to shelter assets 'specifically for that purpose', then such action could be challenged on the grounds of avoidance.

I do not believe that the question from Jeff Liddiard was for that specific purpose, but may be wrong.

I totally agree with you on meeting costs if you are able to do so and the fact that a Trust can be set up does not necessarily mean that such costs would be avoided.

When such Care is needed, I believe the family would wish to choose a suitable private establishment in which to be looked after and if those costs cannot be met by the family, then the cared person could be moved into State Care in any other location to reduce costs.

Sam
Jon Snow
Posted: 16 June 2018 23:03:09(UTC)
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Samuel Saunders -

"The Property Will Trust is to shelter a person's residential value within the nil rate band allowance and pass that asset to beneficiaries. If the property value were below that allowance, then additional assets could be added if available."

I'm not sure I follow this, so please excuse me.

Isn't the property value within the nil rate band already protected, by definition.

Is this about creating a trust and surviving for 7 years so it is out of your estate.

I'm interested to know as we also have children and decent property assets.


Mr J
Posted: 17 June 2018 05:42:01(UTC)
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Given that googling Property Will Trust immediately provides description of them as a specific means of avoiding use of assets for funding care costs, I find it rather bizarre that there should be a charade that says that’s fine as long as nobody admits that is what they are intending to do. Not sure how that is going to work in a court of law ?

The issue with use of assets to fund care is one of fairness. Suppose A and B have both earned similar amounts in their lifetime but A has saved and invested to provide something for themselves in old age, meanwhile B has chosen to spend everything they earned. B then receives free state care, while the state steals As assets to fund his care. The rich are always fine because they can pay their care costs with no significant impact on their wealth anyway, the poor are fine because the state will pay for their care. However anyone in the middle that might have dared to attempt social/economic mobility towards the rich potentially has all the proceeds of their efforts (on which they have already paid tax) stolen from them to pay for their care cost. Furthermore the need for care costs is itself a health lottery, so if one person is lucky enough to die suddenly they pay nothing, while another that dies slowly from dementia or other condition loses everything. Just imagine if we took this approach with cancer - pay for your own cancer treatment if you have more than 20k, otherwise get it free. No-one argues for this, so no-one should argue for a dementia tax. A contribution from everyone on an equitable basis regardless of whether they win or lose the health lottery is what is needed - say a 10% death tax on everyone capped to a maximum of £150k. Oh but isn’t that exactly what IHT is supposed to be !

I am afraid politicians are self interested and stop at nothing in their attempts to sell utterly hairbrained nonsense to the masses so that they can get hold of more money to use to bribe their way back into power. That’s why we have the student ‘pretend’ loans fiasco which was always irrational nonsense but simply sold at the time using the usual technique. Repeat something enough times and many people believe it.

One final point. Trusts seem a great idea but my experience is that families are not always willing to agree on the optimal mutual financial course. Greed, fear, stupidity, emotion, lack of trust, and selfishness can quickly raise their ugly heads. So it may be as well to consider carefully whether a will trust will be accepted by everyone, and what things different trustees may attempt to do with the assets - you might perhaps need that more independent trustee ?

Samual Saunders
Posted: 17 June 2018 06:34:48(UTC)
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Jon Snow,
Although we all have a nil rate band allowance above which inheritance tax is payable, if a married couple leave all assets to their spouse on death, then when the second one dies, one nil rate band allowance will be given.

Let's say Mr dies first and his Will passes his estate to Mrs. That's fine, but he has not made use of his nil rate allowance and that is lost. The exception being that within two years of his death, any Will could be changed to make use of his allowance, provided all beneficiaries are in agreement.

If his Will stated that His nil rate allowance, part of which could be his half of the property if it is owned as tenants in common, was to go into a Trust, or be allocated to it and eventually be passed on to the children, then his wife gets the balance of his estate, can still live in the property, move house and do whatever, but the nil rate band allowance of Mr is saved for his beneficiaries.

Such a Trust arrangement is nothing to do with the 7 year rule of gifts. That is where gifts are made that are in excess of the normal gifting allowances each year. So if a person gifts £10,000 this year and dies within 7 years, part of that value can be counted in the value of his estate in calculating inheritance taxes.

If a person's estate is below the nil rate band allowance, then whatever gifts are made, the 7 year rule would not come into it as the rule is for estates that are over the allowance, or would be if that gift were added to the value. I hope that helps .

Sam
Samual Saunders
Posted: 17 June 2018 06:54:14(UTC)
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Mr J
I have already explained that such a Trust arrangement was never designed to avoid anything. They were designed to allow someone to pass on their nil rate band allowance to their children safely.

In some cases, where a second marriage has taken place and both Mr & Mrs have children, then both may wish to pass on their allowance, or more, to their respective children. Setting up a Trust for this may be essential and all Trusts are protected.

You make a good point regarding Trustees, who have to be in agreement when managing a Trust. I am fortunate enough to have a family that have been well schooled in these matters by me and if I die first, they would always agree to do whatever is best for their Mother before themselves. I believe also that should it be necessary, they would support private care even if all the assets of their Mother's estate had been used up, therefore from the Trust or themselves after that. State care could be set up miles away and certainly not be the same standard as private care.

Selecting suitable Trustees is very important and if you feel that members of the family may not work together, then you need an independent trustee as well to administer matters. If possible, get a solicitor to act, but agree what charges will be taken by him or he has on open cheque and it could cost dearly.

Trusts are not for everyone, but many people seem to think that they are highly complex and costly to set up. That is not the case, but solicitors are the best place to seek advice, particularly STEP qualified solicitors as not every solicitor knows enough about Trusts.

I hope this helps

Sam
bill xxxx
Posted: 17 June 2018 06:55:48(UTC)
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Er, I may have misunderstood, but I don't think that an unused nil rate band is lost on the first death any more.
See the below from Which earlier this year:

How the rules work for married couples
For example, if bequests from the estate of your husband, wife or civil partner to individuals other than yourself total £162,500, and the tax free allowance is £325,000, only 50% or half of the tax-free allowance would be unused.

If the tax free allowance when you die is £400,000, you would have a tax-free allowance of £400,000, plus the unused allowance, which will then be 50% of £400,000 or £200,000, making a total tax-free allowance on your death of £600,000.

So, if no part of the tax-free allowance was used on the first death, then you will have double the allowance on your death.

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Jon Snow on 17/06/2018(UTC)
Samual Saunders
Posted: 17 June 2018 08:06:19(UTC)
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Hello Bill,

Thanks for that information, which is so very important and something that had not fully been recalled and since my retirement 7 years ago at 70, perhaps the 'fog' is beginning to come in. I knew that there was a new property allowance, but had not looked at the full details,

This link will help others understand more - https://www.litrg.org.uk...sfer-the-nil-rate-band-

It shows how to calculate an IHT liability and with the addition of this extra allowance and being able to transfer any unused allowance to your spouse or partner, may now negate the use of many Trust arrangements.

Thanks again Bill and I hope this will help all those concerned.

Sam


Jeff Liddiard
Posted: 17 June 2018 09:41:56(UTC)
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Well, I've certainly opened a can worms here! Which is actually good as it's good to talk. Hadn't realised there was so much to consider. I will use this information to formulate a plan before I go and see a solicitor - who will be STEP qualified! Thanks to everyone.
Mr J
Posted: 17 June 2018 10:38:01(UTC)
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Gosh Sam, I think the transferable NRB was introduced 10 odd years ago !

In any case you got me reading the link and then other links to discover things I was not aware of...

NRB and RNRB are used up first by any gifts (PETs) made in the previous 7 years. So it seems gifting will not save anything in taper relief unless you gift away more than the NRB and PNRB themselves, or more than a full 7 years have elapsed. VERY different to how I think most people think this works.
(Indeed for gifts into trusts you also need to look at ‘the 14 year rule’)

RNRB is rapidly clawed away completely if total assets exceed £2M, so don’t expect to get a £1M allowance for a couple on that £2.5M London property, or indeed on that £1M property if other assets exceed £1M. Those figures may seem high but given the high and seemingly ever rising price of property, and the enormous capital sums now needed (under almost zero interest rates) to generate a living income in retirement they are going to hit very substantial numbers of people over the next few years.

I despair at the shenanigans of politicians to generate ‘giveaway’ headlines, while creating a reality in tax details which is very different, and becoming endlessly complicated. It would be far better to strip away the complexity and reduce the actual rate of IHT to say 10% of assets over £1M and 20% of assets over £5M with no exceptions.



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