Put house in trust or bequeath to child

[colinjo]

Hi,

My wife and I have 3 kids (9, 7 & 4) and are finally getting around to putting signatures to our first wills later this week.

The wills are straightforward in that if I die everything passes to my wife and vice versa. In the event of both of us passing away before the kids are adults, the estate goes into trust until they are 23.

Today the value of the estate would exceed the current CAT allowances. I obviously don’t know what the tax situation will be when my children reach 23 and receive their inheritance, but for the purpose of this scenario I’m assuming they will continue to exceed their allowances and will have to pay tax. With that in mind, should I bequeath the family home to one of the children in the will rather than putting it in trust because it is exempt from CAT as per http://www.revenue.ie/en/tax/cat/leaflets/cat10.html?

Any advice or pros/cons of putting the house in trust or not are most welcome.

Thanks,
Colin

 

[mf1]

I'm not at all sure that Revenue had babies and infants in mind when they drafted that legislation!

I think you would be far better off planning, on your joint unfortunate demise, for the welfare of the children and provision for (all of ) their accommodation and ongoing financial needs by putting everything in trust with the broadest powers available to your Trustees.

A 13 year old ( e.g.) inheriting a property is a disaster - never mind the potential Revenue complications.

mf

mf

 

[colinjo]

Thanks for the feedback and the strong steer towards putting the family home in the Trustees hands.

I wasn’t too worried about what was in mind when they drafted the legislation. I assume it was to avoid the house being sold to pay CAT while someone was still living in the house. It seemed like something that I could use to exempt the family home from CAT and therefore reduce the tax liability.

In the unfortunate event of my wife and I pushing up daisies, while the kids are still minors, a relation (cousin and husband) will return from abroad to live in the family home.

Can the family home can be bequeathed to my son but managed by the Trustees until he is of age?

What potential revenue complications did you foresee?

Cheers,
Colin

 

[Bronte]

In the unfortunate event of my wife and I pushing up daisies, while the kids are still minors, a relation (cousin and husband) will return from abroad to live in the family home.

You cannot rely on that for a stategy in my opinion. Far better to allow the relations who are willing to take on young children to go and live wherever they want, in any case you cannot enforce this. People cannot up and leave a life behind because that is your wish. You must think long term and what suits everybody.

For your case I'm assuming you are talking about a very large inheritence, for that you need to pay a good solicitor who is an expert on trusts and avoidance of tax, so possible a tax advisor also. Maybe you should hire one of the excellent solicitors on here such as Vanilla or MF1.

 

[Vanilla]

Colin, the whole point of a discretionary trust is that it will allow your trustees to appoint property out of the trust in a tax efficient manner. Ie, put all your property into the trust, appoint trustees, the trust is entirely discretionary so that the trustees may give whatever property they decide to whatever beneficiary, and obviously they will do this in a way that best suits the situation at that time in the future. Alongside the discretionary trust is usually a letter of wishes in which you can point out to the trustees your wish that, for eg, your son reside in the house and be given the house if that exemption still exists.

Your solicitor will talk you through all this when you go in, but remember no-one has a crystal ball!

 

[colinjo]

Thanks for the advice. The Will I sign this week shall leave it in the Trustee's hands to administer until the kids each turn 23.

Colin

 

[huskerdu]

Is it tax efficient to leave full estate to a spouse? I had thought it more efficient to leave each child the maximum that they can inherit on a tax free basis and the remainder to the spouse.

If the spouse receives the whole estate and then remarries this has significant implications for any inheritance your children might expect to receive.

That depends on how much of the estate is the family home.
If the family home is jointly owned, then it does not form part of the estate and will pass to the surviving spouse anyway.

If not, then writing a will that does not leave the family home to the spouse but instead leaves part of it to the children might be a recipe for a nice family row down the line.

Children have no right to receive an inheritance, anyway.

Best to keep things simple in my opinion and leave everything to each other with the childrten inheriting after the death of the last parent.

On the other hand, If the estate is SO massive that the family home is a small part of it and there is a huge potential tax bill, then the OP has a nicer problem than most of us and a trip to a accountant is in order.