Will Trust - how does it work?

[cliffordpope]

A house is owned as tenants in common by a couple, and each leaves their half of the house in their will in trust for the children, who are joint executors of the wills together with the surviving parent. Supposing the children do not want to sell the house, but are content that it remains in trust indefinitely. Can this continue indefinitely, with one of them living in the house by agreement with the others?
They might eventually all agree to sell the house, or perhaps a different one want to live there, or share.
In short, the house would simply be a family asset to be used by whoever wanted or needed to live there. What sort of trust would this then be? In effect a discretionary trust? Would the wills need to have the usual sort of trust document, or is the will wording “left in trust to my children” sufficient?

It a large house, the children all grew up in it, they are not dependent on realising capital for their own needs, they would just like to keep it.

[AGoodman]

It sounds like a discretionary trust BUT:

- it might give the surviving spouse a life interest first, to give them security in the home
- it would risk losing the additional nil rate band, although not if the house in total is worth £700,000 (so the surviving spouse's half share is worth £350,000)
- you may well get a tax charge every 10 years of up to 6% (depending on values)

It's a balancing act and very fact sensitive.

[AGoodman]

My point 1 should be security in the home AND spouse exemption from inheritance tax on the first death.

[cliffordpope]

Wills commonly leave property "in trust for my wife/children" but without any clear ultimate plan but a sort of assumption that the house would be sold in due course. My parents for example left no additional paperwork beyond their wills, certainly no trust deed, so how could it become a discretionary trust? In the event we simply sold the house, but supposing we had decided we'd like to keep it - how could it become a discretionary trust with no deed, no formal appointment of trustees, and no rules about how the trust would operate?
Does it mean that with no trust deed etc it has to be sold regardless of the children's wishes? It must be quite a common occurence, but seems to be a bit vague as to what is actually happening.

[strawn]

"how could it become a discretionary trust with no deed, no formal appointment of trustees, and no rules about how the trust would operate?"

If all the beneficiaries agreed, and all were adults, could they not sign deeds of variation such that their inheritances were passed into a Discretionary Trust just as if your parents' wills had set it up like that?

I'm sure a lawyer could say whether this guess is right.

[cliffordpope]

Thank you very much both. We clearly need to get more specific legal advice if we want to pursue this.

[AGoodman]

Just to point out that professionally prepared wills should be absolutely clear as to the terms of any will trust. There should not be any need for an external deed.

Where, for example, the will leaves a legacy or share of residue to "my wife for life" or "my children as attain the age of 25" but doesn't contain detailed powers and provisions, that would be supplemented by a number of statutory powers such as powers to invest (Trustee Act 2000), powers to accumulate and pay out income and capital (s.31 and 32 Trustee Act 1925) and powers to appoint new trustees (s.36-40 Trustee Act 1925).

A provision that just said "in trust for my wife" or "in trust for my children" and nothing more is likely just an outright legacy because its not qualified in any way.

[cliffordpope]

A provision that just said "in trust for my wife" or "in trust for my children" and nothing more is likely just an outright legacy because its not qualified in any way.

Our wills are due for updating to reflect other changes, so we'll question this point with the solicitor. They are indeed very vague about the trusts, which had puzzled me recently on reflecting. So they are not really trusts at all.