Should i keep the discretionary trust?

[daviel]

I would be so grateful for your advice. My mum and dad rewrote their wills in 2006. In the will they added a clause relating to the nil rate band discretionary trust. Although this was to protect against paying too much tax on the property I know my mum was keen to do this to protect her share for me after she died. My mum had cancer and knew she was unlikely to live long. She also knew that my Dad would be unlikely to remain single for long. My mum died March 2009.

We (dad & I - am the only child) have been advised that this type of trust is no longer necessary because of the change in law. They recommend that we wind up the trust and change it so my dad has sole ownership of the assets (home). I have agreed in principle but have worries that my mums concerns may not have been taken into consideration (my dad has found a new partner).

I agree that this new trust does sound very complicated and does seem extreme in the maintenance of it however is there another option we could explore. I do not want to come across as money grabbing and heartless. I am happy for my Dad to spend every penny of his but I would be heartbroken if my mum’s home ends up being owned by another women.

I have discussed my fears with my parents solicitor but he does seem very keen to wind up the trust. I would be grateful for any advice.

[maths]

Who are the trustees of the trust and who are the beneficiaries?

It is the decision of the trustees as to whether to wind up the trust or not.

Whilst, strictly speaking, such trusts are not any longer necessary in relation to IHT they do serve the purpose in relation to your mum's wishes.

If the trust is collapsed and your father takes 100% of the house absolutely then he is then free to leave it to whoever he wants eg his new partner.

By retaining the trust it would be the trustees' decision as to who should get the (50%?) held in trust which your mum left.

If the main object is that you inherit your mum's share at some point in the future I would be inclined to retain the trust and not appoint the 50% out to your father.

These situations can be a little delicate; could you talk to your dad as presumably he knows about your mum's wishes.The solicitor who acted for your mum may also be able to help (unless it is this solicitor suggesting winding up the trust).

[Lee Young]

I entirely agree with Maths. I deal with these sorts of trusts all the time and there is great merit in retaining them. True the IHT reason for them has now disappeared but the trust will protect your mother's estate and ensure that it passes to the correct beneficiary in the long term - ie you.

Whoever is advising you to wind up the trust is mnissing the bigger picture.

[daviel]

Thank you for your reply. I am the trustee with my Dad. The estate would then go do me on his death. My Dad said that it is up to me to decide but he does not see the point of making life complicated as he plans to leave it all to me anyway. I have been advised that the trust is too complicated and expensive to run and Dad feels it is better to change it to a normal will (back to him). The solicitor who acted on my mums behalf is the same solicitor who is now recommending we end the trust.

[daviel]

Is ther another alternative that would be simplier. Could i not change it to a life interest? I was told that i only have two choices IHT or a normal Will, is this correct?

[maths]

The bottom line (i hate that expression !!) is whether you trust your dad to leave the house (or mother's interest therein) to you on his death. This purely a personal matter and only you know how your family works.

As an outside advisor the above still stands but one knows of numerous cases where at a later date, for a variety of reasons, parents change their minds and thus such advisor would tend to go with, as it were legal certainty (ie the trust stays), rather than relying on family bonds and verbal promises.

Nevertheless, only you know all the family interactions etc.

[maths]

One additional point; trustees must act unanimously (subject to any contrary provision in the trust deed).

Thus, you cannot be forced into terminating the trust.