My husband and I are rewriting our wills to leave our half-shares of the family home to our three adult children – rather than to each other. Two of our children, who live in the UK, will be the executors of our wills, and we want to ensure they have full control over the eventual disposal of the property – with the third getting his share only on the final sale of the property. Is making them the executors of our wills sufficient control? Or should we leave our half-shares to the two UK-based children, with our wills stipulating that the third gets his share only on eventual disposal by them? We would like to keep the solution simple to avoid unnecessary legal costs.
Matthew Hansell, private client partner with solicitors Mills & Reeve, recommends that you incorporate trusts into your wills. On the first death of you or your husband, you want a half-share in the house to pass outright to your children.
Presumably the intention is that the survivor should be allowed to live in the house for as long as he or she wants. But by giving a half-share directly to your children, you are putting that spouse at some risk. Any of the children could demand a sale of the property to release their share, and there is a risk that a sale could be forced by a third party if, say, a child got into financial or matrimonial difficulties and there was a claim by a creditor or their spouse.
To protect the surviving spouse, Hansell recommends you include in your wills a provision for the first death to leave their half-share to a trust. The trustees could be the UK children and the surviving spouse, and these could also be the beneficiaries along with the non-UK child. The trustees can allow the surviving spouse to live in the house for as long as he or she wishes.
In this way, you put the decision-making with the trustees rather than the children directly and protect against a claim by a third party. This is because the half-share of the property belongs to the trustees, rather than to the children.
You may think that using a trust is over-the-top, but it is the only thing that will give the surviving spouse protection. It would not be expensive to set up or to operate.
On the second death, that spouse can either leave their half-share of the property to the trust or outright to the three children. If there was likely to be some delay between the second death and the sale of the property, it would be better to use the trust vehicle as the control of the sale would be with the trustees, who in that event would be the two UK-based children.
Although executors do have a say over the timing of the sale, their job is to sell assets as quickly as possible, so they can only delay the sale for a reasonable time. There are no such restrictions on trustees. Their duty is to hold the house and use it in the best interests of the beneficiaries, including taking a view on the timing of a sale.
Your suggestion that you leave the property to the two UK-based children, stipulating that the third will get his share on the eventual disposal, could prove problematic. This arrangement would be a gift to the two children subject to a right in favour of the third child. There is a risk that it will look as though the property is owned by those two children: for example, if it was sold at a profit, HM Revenue & Customs may view the gain as being that of the two UK-based siblings, leaving them with a tax bill. There would also be difficulties were the UK-based children to die or get into financial or matrimonial difficulties during their ownership.
