My husband and I are considering putting half of our house in trust to the children with the proviso that when one of us dies the other will stay in the house until his/her death. In the event that one dies, does this mean that the widow/er couldn’t sell the house to move into a smaller property, or if the house WAS sold, half the selling price would go to the children at that time?
You need to take proper independent legal advice for this.
If you are "joint tenants" you do not each own a discrete "half" of the house. The pair of you own it in its entirety and the whole becomes the property of the survivor upon the death of the first. If you are "tenants-in-common" you each own a discrete half to do with as you wish. How you own the house may well have a bearing on the proposal you have.
I assume your plans are in order to avoid inheritance tax. You may know that the current exempt limit is £325k and when one of you dies (assuming they leave everything to the other) the survivor assumes this allowance in addition to their own. More than this, if you leave your home to your child(ren) or grandchild(ren) your allowance goes up to £450k and this too is transferable from one spouse to another in the event of the death of the first. This means your IHT free allowance can be £900k. But as I said, professional advice is a must.
NJ, that last part is very interesting, we have mirror wills, the house is tenants in common and there's a straight 50/50 split in the wills, I hadn't realised that the limit is different when it's left to children.
why are you doing this ? put the whole house into trust with a life tenancy for the parents ( living obviously ) BUT - there are some pretty horrific tax implications to this ( 10% periodic charge ) and the trust is counted is treated as personal possessions for IHT purposes
do there is no tax advantage
as one judge said : the age of the trust as a tax efficient vehicle is over.
If you wish to pass assets to your kids escape tax - you need to pay for advice ....( and not here) in order to be successful in that, you need not to retain benefit or an interest in possession
( so you cant pass the house to the kids and stay in it UNLESS you pay them a market rent)