Is a Trust wording in a lease settlement still valid after Freehold is purchased ?.

[Lawcruncher]

I understand freehold means ownership of the property and leasehold means the right to live there for remainder of the 1000 years.

A bit of a simplification. Ownership is something you think is straightforward until you go into it. It is essentially about who has what rights over property. When it comes to land it is especiaily tricky. All land in England and Wales belongs to the Crown. All you can have is an estate or interest in it. What a freeholder has is an estate in land which continues indefinitely, but not for ever. A tenant has an estate limited in time. Both therefore own something.

Surely owning the freehold title gives the right to live there and ownership contains the value?

What a landlord "owns" is the reversion, that is the right to receive rent (if any) and the right to possession, but only when when the tenancy ends.

What a tenant "owns" is the right to possession.

In the case of a long lease at a nominal rent, the leasehold estate is going to be worth a lot more than the freehold estate.

[Phil20]

Thanks for all info. The original lease was 1885. The leasehold trust was dated 1972 , the Freehold was purchased 1993, mother died last year. HMRC advise there is no IHT to pay as value of whole estate including property is below threshold. I am the Trustee of the Trust and one of the beneficiaries. The part that I cannot get my head around is that the value of the property is in the leasehold title even after buying the Freehold ?.
I understand freehold means ownership of the property and leasehold means the right to live there for remainder of the 1000 years. Surely owning the freehold title gives the right to live there and ownership contains the value ?.
What happens at the end of the lease in 900 years time ?. Just being curious. I am employing a solicitor.

[Lawcruncher]

The tax rules for trusts are complex, and if the trust was created within seven years of death, it is likely to be part of the estate for inheritance tax. Moreover, this appears to be a trust with reservation of benefits and to quote https://www.gov.uk/guidance/trusts-and-inheritance-tax :

In my view, this estate is too complex for DIY probate.

Agreed.

However, just to clarify: Although a gift with reservation of benefit is regarded as part of the estate for tax purposes, it is not for deciding who is entitled to the property.

[leaseholder64]

The tax rules for trusts are complex, and if the trust was created within seven years of death, it is likely to be part of the estate for inheritance tax. Moreover, this appears to be a trust with reservation of benefits and to quote https://www.gov.uk/guidance/trusts-and-inheritance-tax :

If you make a gift into any type of trust but continue to benefit from the gift - for example, you give away your house but continue to live in it - you will pay 20% on the transfer and the gift will still count as part of your estate. These are known as gifts ‘with reservation of benefit’.

In my view, this estate is too complex for DIY probate.

[Gordon999]

Didn't your mother explain the system of property ownership under the freehold title and leasehold title to you ?

( 1) The freehold title gives legal ownership of the property to the title holder ( Your mother was the title holder ) .
Under her will , the title passes to you,sister plus 2 grandchildren. This title is now owned by 4 persons.

(2 ) Under the leasehold title, this gives the right to use the property for 1000 years to the title holder ? The holder is a Settlement Trust ? .
( The trust is outside your mother's estate and the property will not be counted for inheritance tax )

This trust gave right to live-in to your mother for her life time and now the right to live-in passes to you and sister for your lifetime's use .

The value of the property is in the leasehold title ( which has the right of live-in for 1000 years ).

[leaseholder64]

I think what is being said is that you can only sell the freehold, as executor. If you want to sell the leasehold, you are your sister will need to do so as trustees, under the older trust.

As the trust had a reservation of interest, I suspect the estate will take the full tax hit, either way.

Given that, there is a suggestion that the intent was override the trust, is there any possibility that you and your sister could agree to sell the leasehold and gift as per the will.

It seems to me that this is a case where you do need a solicitor for to act as or for the executors.

[Phil20]

I was told that the Freehold interest was held subject to the lease with 900 years to go, not sure what this means ?.
When I sell the property is the value in the freehold or the leasehold ?
HM LR is title absolute and Freehold in my name now after an Assent, but section C still mention the 1885 lease.

[Lawcruncher]

The following assumes the position is exactly as you have described it without any complications.

When a tenant buys the freehold merger of the leasehold and freehold interests is not automatic and merger cannot take place if the two interests are held in different capacities. If your mother held the leasehold interest as trustee upon the trusts declared in the setllement and held the freehold interest in her own right then the two interests were held in different capacities. The freehold interest goes according to the will and the leasehold according to the setllement.

[Phil20]

I am executor of a Will. The Freehold was purchased a few years ago. Before the Freehold purchase, the 1000 year old lease residue had Trust wording included in the settlement that the property is for the use of my mother for life, then comes to me and my sister only. Mother later made a Will leaving the property to me, my sister and a couple of grandchildren. The question is, Did buying the Freehold extinguish the wording in the residue of the lease settlement ?. Do I distribute according to the Will or to the old Trust ?. Thanks,