Mortgage to buy out will trust

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    Mortgage to buy out will trust

    Last November an elderly relative who owned several rental properties in London passed away. In her will she split her assets into four equal parts shared between myself and three other relatives.

    At this time the properties are held in a will trust. The executor wants to liquidate these properties then disburse the funds from the sale. The three other beneficiaries are happy to receive the cash from the sale. However as these are good income producing properties that served my Aunt well I want to buy these properties and continue with the family business.

    So I am looking for information on how to raise financing so I can purchase some or all of these properties. I am told that with a twenty five percent equity position I should be able to get a mortgage. But as these properties are presently held in a trust I don't know if I can do this.

    So any suggestions as to how to go through this process or referrals to people who can help me would be greatly appreciated.

    #2
    There's something missing from this account.

    If the properties are part of the estate, and unless the deceased give instructions in the will, the executor can decide what to do with the estate.
    If the will sets up a trust (or trusts) and puts the estate into that trust, the trustees have the same power.

    If whoever is the decision maker wants to sell the properties and you want to buy it, something can be done.
    However, their obligation to maximise the value to benefit the estate or the trust might make it complicated.

    If you want to become a landlord, there is nothing about these particular properties that helps you.
    Why not take whatever cash the executor or trustee gives to you and invest it in property?
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      As jpkeates has said there should be no problem in raising monies to purchase one or more of these properties: your broker will need to explain to the lender , for transparency purposes, of the linkage between yourself and the Trust and that the Trust has power to sell either on the open market or to one or more of the beneficiaries subject to independent valuations being received, once established you will have little or no trouble in raising monies.

      Comment


        #4
        Thanks for the replies. It is much appreciated. From what I understand of the present status of the properties, they weren't put into a trust with the intention of them continuing to be held in trust. The will trust is only for the purposes of having a way of managing the properties while the probate on the estate is being settled.

        The solicitor who wrote the will was also appointed as the executor in the will. They have informed us that as executor they can decide to sell off the properties without having to consult the beneficiaries. They have had a valuation done for the purpose of assessing any probate and inheritance taxes.

        Although my intent is to hold onto them and continue to rent them out. I do feel the valuation is somewhat low for East London property and a decent profit could be realized from selling them at our at my leisure instead of at an estate auction. I also want to buy out the other three beneficiaries because two of them are impossible to work with and the third is old and just wants the money.

        I guess I should add the reason why I am asking for help on this forum is I have lived in the US most of my life. So although I have bought and sold properties in the US I'm not familiar with the intricacies of arranging a mortgage in the UK.

        Comment


          #5
          Originally posted by loanarranger View Post
          As jpkeates has said there should be no problem in raising monies to purchase one or more of these properties: your broker will need to explain to the lender , for transparency purposes, of the linkage between yourself and the Trust and that the Trust has power to sell either on the open market or to one or more of the beneficiaries subject to independent valuations being received, once established you will have little or no trouble in raising monies.

          I get the impression from this then, that I may need a buyers broker to represent me in this transaction or that it could at least make it easier for me. Also that I should be able to arrange financing.

          Thanks.

          Comment


            #6
            May I suggest that if you are determined to purchase , you obtain a valuation from a Chartered Surveyor at your own expense , if this is diametrically opposite that as obtained by the solicitor then you have justifiable grounds to contest his actions to auction the properties at prices which will be below the Open Market Value, at the same time get your mortgage funding arrangements in place at least on a Decision in Principle Basis , this will then add weight to your case that your offer to purchase at an agreed price can be expedited as you have already done the preliminaries .

            You make mention of having spent most of your time in the USA , have you been domiciled back in the UK for at least two/three years and can prove your income, I ask this as these are fundamental questions which any lender will be asking , also are you a Home Owner in the UK as there are few lenders who will lend to someone who has no recent history of property ownership , with or without having a mortgage.

            Comment


              #7
              Originally posted by Simon Demont View Post
              ... The will trust is only for the purposes of having a way of managing the properties while the probate on the estate is being settled.
              Settling probate can take between 12-18 months in some cases, so, depending on how far through the process you are, there should be sufficient time to sort things out properly.

              The solicitor who wrote the will was also appointed as the executor in the will. They have informed us that as executor they can decide to sell off the properties without having to consult the beneficiaries. They have had a valuation done for the purpose of assessing any probate and inheritance taxes.
              While he is correct about his role and rights as executor and trustee, he has to be somewhat careful. As executor he can do what he wants, although it should be in line with the deceased wishes (as much as he/she is aware of them). As a Trustee he also has to act in line with the wishes of the trust (again, there would normally be a "letter of wishes"). A trustee cannot simply ignore the beneficiaries of a trust, however. If all the beneficiaries agree (which sounds like it might be difficult) the Trustee(s) can be replaced.

              Although my intent is to hold onto them and continue to rent them out. I do feel the valuation is somewhat low for East London property and a decent profit could be realized from selling them at our at my leisure instead of at an estate auction. I also want to buy out the other three beneficiaries because two of them are impossible to work with and the third is old and just wants the money.
              The valuation of the estate for tax purposes (which is part of the probate process) is based on the open market value at the point of transfer into the inheritance pool - usually on death. This tends to be a contentious point, as it's usually an estimate and it usually appears low to the beneficiaries of a will. This is actually good for the beneficiaries of the will, because the tax payable by the estate is going to be based on this estimate.

              When the property is actually sold, the value will be controlled by the market. If they are to be sold at auction, this would probably help you buy them as cheaply as the market allows. You would lose as a beneficiary, but gain as the purchaser - which seems to me to be good for you, you lose only a proportion of the value and gain the most personally.

              I guess I should add the reason why I am asking for help on this forum is I have lived in the US most of my life. So although I have bought and sold properties in the US I'm not familiar with the intricacies of arranging a mortgage in the UK.
              If you are buying the properties to rent them, if you were UK based, you would probably look for a "Buy To Let" mortgage.
              These are interest only mortgages, based on the rental and property value, rather than your income.

              You should probably think very carefully about the value of investing in UK property from the US.
              Any rent would normally be paid to you with UK income tax deducted and you are going to need some serious specialist help with tax, particularly Capital Gains Tax, (which is the tax on any increase in the value of a property between you buying it and then selling it) and Inheritance Tax (which is what your estate will pay if you die owning the property).
              UK Taxation is both complex and relatively high (and is subject to significant change when our government changes) - you could end up receiving a lot less than you might reasonably expect, particularly as the obligations on UK Landlords aren't trivial!
              When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
              Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

              Comment

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