Monthly Archives: May 2016

Smashing the nest egg: trusts properties and equity release

By | Equity Release | No Comments

Smashing the nest egg: trusts properties and equity release

Many clients may consider placing their property into trust during their lifetime for the purposes of control, protection, mitigating probate delays and fees, and for peace of mind. However, once the property is held on trust, it can be difficult to obtain funds from the property value through re-mortgaging or equity release.

This is because the settlor is no longer the owner of the property: the trustees hold the land for and on behalf of the trust. It is trust property now, and lenders are rarely willing to assist with trust properties. In order to get around this some settlors may ask their trustees to remove their ownership and / or restriction, giving the legal ownership back to themselves so as to allow for the mortgage.

This is fraught with difficulties. The first is that it is up to the trustees, and not the life tenant, as to whether to dispose of the property in this way. They may not be so easily persuaded. Secondly, the trustees lose their safeguards over the registered title by passing the property back to the life tenant: with their title and restriction gone, the trustees’ rights over the equity in the trust property may not be made known to any subsequent conveyancer. If anything should go wrong while the property is in the hands of the life tenant, the trustees may be liable for negligent loss.

Thirdly, the trustees can only consider this route if they have explicit powers to loan or gift to the settlor (as life tenant or discretionary beneficiary). If they do not have these express powers in the declaration of trust, it may be impossible to use trust capital in this way.

Fourthly there can be long-term risks. The trustees have strict duties to ensure that the trust fund value is protected. If the life tenant undertakes a mortgage or equity release scheme which eats up more and more of the equity over time, or if they fail to make payments, the fund becomes jeopardised. The trustees can be personally liable for this loss.

Remember, there are few legal duties for mortgagees in receivership scenarios to sell the property at market value or above: so if payments lapse, they can reclaim and sell the property at a low price just to recover their investment, leaving little or nothing for the trustees, often with no legal redress for the trustees. The beneficiaries, of course, could still pursue the trustees for this loss.

In truth the purpose of these “protective trusts” is precisely that: to protect the equity in the property. These arrangements are not personal piggy banks for settlors. They are important legal arrangements riddled with strict duties and severe penalties for trustees. Expert advice should be sought for property trusts where equity release or re-mortgaging may become a necessity at a later date. Estate planners and clients alike should beware of any arrangement which promises a nest egg which can easily be smashed and guzzled.

“You won’t get a penny” – how to exclude someone from your estate

By | Estate Administration | No Comments

When family members fall out, sometimes the emotions can run very deep. It may be impossible to reconstruct the bridges we burn. Difficult though it can be, disinheriting a child or other family member may be the best way of protecting our wishes once we are gone.

In England and Wales a testator may leave their estate to whomever they please: they have “testamentary freedom.” But this is subject to any successful legal challenge from a family member or dependant, who can prove to a court after the testator’s death that they received unreasonably small provision under that Will.

It can sometimes defeat the whole purpose of the Will: recent news stories of court cases can clearly attest to this fact, much to the concern of lawyers and members of the public alike. One lady made it very clear in her Will that her daughter was to receive nothing, only for a court to overturn the Will and provide several hundreds of thousands of pounds to the daughter – and not even in a particularly large estate.

So how can you ensure that those with whom you have fallen out cannot make a claim on your money once you are gone?

The most accepted course of action is to write a Will explicitly excluding that person. You should also make a “letter of wishes” for your executor (and potentially, the court, should a claim arise at a later date) stating clearly your reasons for the exclusion.

It is also best to ensure that there are no financial ties during lifetime: if there is any sign of financial reliance, the court can use it to bolster their claim. Cutting all ties can be hard, but it is sometimes necessary to a successful Will exclusion.

Even with these safeguards, and even in the most evident family breakup, a claimant can be successful. It largely comes down to the court’s discretion after death.

Sometimes the best course of action is to actually make a small, sufficient gift under the Will, just to prevent the court from finding a lack of provision. There are some trusts which can “provide” for a prodigal child without the testator having to sacrifice too much money, or indeed their own principles.

Speak to your Will writer for information and guidance in this difficult and sensitive area of estate planning: they should be able to help.

What happens when I die?

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What happens when I die?

It can be uncomfortable to think about it. But if we really want to ensure that our wishes are seen to and our loved ones are protected, we all have to ask ourselves a very natural and important question: what will actually happen when I die?

Firstly, the police should be notified and a doctor will be able to issue a medical certificate of the fact of death. Soon the coroner will be contacted and, unless there is an inquest required, it will then be possible to register the death formally at the Register Office and arrange the funeral.

Who arranges the funeral? Ordinarily this is done by next of kin, but if there are no close family members the executor of the Will can undertake this duty.

Then the administration process can take place in full. Estate asset holders (banks, pensions, etc.) are notified, along with anyone to whom money is owed from the estate. Probate may or may not be required, depending upon the size and nature of the estate or the contents of the Will. If you have any concerns as to whether or not Probate is required, you can contact us: we will be happy to provide initial guidance free of charge.

There can however, during these difficult first few days, be a period of near-lawlessness. Often we at SWW Trust Corporation see that, when there is not an expert professional to oversee matters carefully, a lot of things can go wrong during this difficult time. Disinherited family members may steal or destroy the Will; cash or jewellery may go missing; locks could be changed, and other impediments to the true and proper management of the estate can arise. After the event it can be very hard to correct these wrongs.

So how can you ensure that this most sensitive time passes with minimal distress to your loved ones?

We recommend keeping your Will regularly updated and safely stored, along with any deeds, original share certificates, policy documents and other crucial paperwork. Ask your Will writer for any help they can provide. We also recommend having a funeral plan arranged – again, your Will writer should be able to help you with this – to minimise confusion and distress, and to ensure that the funds will be available to have the ceremony you want and deserve.

For deeds it is a particularly good idea to register your land ownership through the Land Registry. Speak to SWW Trust Corporation about our services: we would be happy to help.

Keep good records of your professional contacts – your executors, Will writer, financial organisations – so that it is easier for those who want to do right by your estate to tend to your wishes. Make sure that if you do have valuables, or spare cash, that this is all safely stored and protected.

Appointing a professional executor such as SWW Trust Corporation can really help in difficult families, to act as an independent, professional and expert service: ensuring that your estate passes precisely as you intend.


James Greenwood

Estate Case Manager

SWW Trust Corporation

Residence Nil-Rate Band

By | Residence Nil-Rate Band | 2 Comments

The new Residence Nil-Rate Band
In last year’s Budget the government introduced an exciting new transferable nil-rate allowance in addition to the present £325,000 for individuals. The aim is to take the family home out of inheritance tax for all but the wealthiest families. SWW Trust Corporation is keeping an eye on the changes and intends to deliver its services in view of this new dynamic. It will be a game-changer for many property-owning families, and as such we intend to keep abreast of all developments in the legislation.
Family homes are meant to benefit from extra inheritance tax exemptions from 2017. When a main residence is passed on death to descendants, such as a child or grandchild, the allowance for this asset will be up to £100,000 in 2017-18, up to £125,000 in 2018-19, up to £150,000 in 2019-20, and up to £175,000 in 2020-21.
This should make an effective £500,000 inheritance tax threshold for estates in 2020-21. As with the current nil-rate band (for all estate assets, not just property), any unused allowance can be transferred to a surviving spouse or civil partner which means the effective inheritance tax threshold will rise to £1 million in 2020-21 for married couples.
The new nil-rate band will also be available when a person downsizes or ceases to own a home and assets of an equivalent value, up to the value of the additional nil-rate band, are passed on death to direct descendants. As such the new residence nil-rate band should be available in a wide range of estates where residential property has previously been owned.
The technical details of how the additional nil-rate band will support those who have downsized or ceased to own their home will be the subject to further review. What if the client sold up ten years ago, would the value of such a property also be afforded this extra tax allowance? SWWTC will be monitoring this consultation and will advise introducers accordingly.
There will be a tapered withdrawal of the additional nil-rate band for estates with a net value of more than £2 million. This will be at a withdrawal rate of £1 for every £2 over this threshold. So very large estates are unlikely to benefit from the changes.
This additional nil-rate band will apply if the deceased’s interest in a residential property is left to one or more direct descendants on death. A “direct descendant” will be a child (including a step-child, adopted child or even a foster child) of the deceased and their lineal descendants, according to HMRC guidance: however we must wait for the Bill to pass before we see the full definition of exempt beneficiaries.
The main residence nil-rate band will be transferable where the second spouse dies on or after 6 April 2017 irrespective of when the first spouse died.
The personal nil-rate band will continue to be £325,000 from 2018 to 2019 until the end of 2020 to 2021.
In summary: SWWTC eagerly anticipates further consultation and the passing of the relevant legislation: given the vast potential for this new nil-rate allowance we expect significant changes and further queries to be raised. We will provide guidance for our clients on these developments to ensure that, in working with us, we can apply the new rules for maximum benefit.

Can you prove that you own your land?

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Can you prove that you own your land?

It may seem like a startling question: but how can you prove that you own your land? Bear in mind that under current legislation no sale, mortgage or other disposition of land can happen unless you can prove good title. Nowadays this is done by reference to the Land Registry, which keeps a record of title deeds and land ownership electronically. This is by far the easiest and most efficient way of proving land ownership.

But what if you just have title deeds? Is that not proof enough that you own your land?

Title deeds do prove ownership, but remember that they are very easily lost, damaged, incomplete or even destroyed. If that happens, it can be very expensive and time-consuming to replace them. And if someone dies and their executors cannot prove ownership of the land for them, it takes even longer and can draw out the already difficult administration process for their loved ones considerably.

Getting your land registered is a sensible way of proving good title for years to come, rather than leaving everything until it is too late. “First registration” of the land, while still alive, is cheaper and less demanding than proving good title after death. We see many estates here at SWW Trust Corporation which suffer significant delays and costs simply because the testator did not protect their ownership rights fully through registering their good title in lifetime.

Contact us about having your property registered: we offer a swift and friendly service for something which, though seemingly dull and easy to ignore, is of incredible importance to families. It is not just about protecting the economic value of your house: it is about protecting the happy family memories of your home.


James Greenwood-Reeves

Estate Case Manager

SWW Trust Corporation