Will This Be The Next Mis-selling Scandal?

Promises from slick marketing campaigns that by putting your property and assets into a trust you can avoid care home fees and Inheritance Tax (IHT) are all over the local and national press.

Several companies are currently running high profile marketing campaigns targeting people concerned about their wealth being chipped away by care home fees and IHT. Often termed in the adverts as ‘Asset Protection Trusts’ or ‘Family Protection Trusts’, this type of trust has been around for many years but has been given a ‘marketing makeover’ by these companies, who are eager to cash in on worried consumers, often charging several thousand pounds to set one up. In fact, in our opinion, this type of trust may only be suitable for the circumstances of around 5% of the UK population.

The companies often name themselves as Trustees on the Trusts they establish meaning that they then own and control the assets within the Trust; for instance, if you put your house into the trust, then the company directors (as the Trustees) own your house. It isn’t possible to end the trust without their consent and in order to give that consent many will charge a fee of several hundred pounds for meetings and further charges will be made should the Trustees retire from the Trusts.

Why Don’t These Trusts Work?

If you need to go into care in the future a local authority could decide you should pay for your care anyway because by putting your assets into the trust you have ‘deliberately deprived’ yourself of capital which could have been used to meet the costs.

How Are They Getting Away With It?

The provision of advice around Will writing and estate planning is not regulated by a professional body; the scheme these companies are marketing is not illegal but would only be suitable in a very limited percentage of cases.

If you are considering whether a trust would suitable for your situation, you should seek advice from a regulated professional with appropriate qualifications.

It is advisable to use a provider who is regulated such as a Solicitor or a member of the Society of Trusts and Estates Practitioners. Solicitors are regulated by the SRA and are required to have professional indemnity insurance. If the firm you used to make your Will no longer exists, then your documents will still be safe as the SRA will ensure all matters are passed to another Solicitors’ firm. Anyone can call themselves a ‘lawyer’ but only Solicitors with practising certificates issued by the SRA can legally use that term.

If you would like to talk to us about how we can help you please contact Rebecca Head or Joanna Parkin on 01543 440 308 or use the contact form on our website https://www.fouroakslegalservices.com/contact/

 

Property Trust Wills

An increasing number of people are worried about the possibility of needing care in the future and the financial impact that may have upon their assets. Protective Property Trusts in your Will can enable a couple to save part of their property to pass onto their family.  These types of Wills are also sometimes called Property Trust Wills.

What is a Property Trust Will?

A property trust is a type of legal structure that can be included as part of your Will and is designed to protect your share of jointly owned property from being included in financial assessments that are carried out to determine how much you should contribute to long-term care fees. The structure can also be useful should you be worried that your spouse might re-marry in the future by protecting your share of the property for your family.

A property trust will covers a share of a jointly-owned property to ensure that a surviving spouse or partner can still benefit from their deceased partner’s share in the property even when they are gone.  Should the survivor have to go into long-term care, their deceased spouse’s share will be protected – and can be passed onto family members upon their death.   

Most couples when making a Will, leave their assets directly to their partner. Should the partner require care, this can mean that there are less assets to pass onto the family after their death.

For this reason, Property Will Trusts can hold assets on behalf of the partner to guard against deductions made due to care costs.

How Does It Work?

The best way to explain how Property Trust Wills work is through an example:-

Let’s say Mr and Mrs Marr jointly own their home. They want to ensure that their respective shares will be passed to their two children when they pass away.  They want peace of mind that if the survivor of them needs care, at least half the property can be passed to their two children.

If Mr Marr dies before his wife, his half share in the property will go into the Property Trust set up in his Will – with the remainder of his estate left to Mrs Marr. She then has the right to occupy the property or move house if she wishes. If she requires long-term care in the future, her Husband’s share of the property remains in trust and cannot be taken into account during any financial assessments to determine what she will need pay towards her care.

In short, 50% of the value of the property cannot be taken and used to pay for her care fees.

This type of trust covers every eventuality. Even if Mr and Mrs Marr’s children divorce, predecease them or declare bankruptcy, the surviving spouse still retains occupancy and their share in the property is fully protected. Upon Mrs Marr’s death, the half share of the property is transferred to her two children, even if Mrs Marr has used all her assets to pay for care.

What Does This Cost?

Depending on your circumstances, this type of arrangement can cost from £400 – £525 + VAT.

Four Oaks Legal Services can assist if you feel a Property Trust Will might suit your circumstances.  Please contact us on 01543 440 308.

 

Should You Give Your Property to your Children?

One of the frequent questions I get asked as a Solicitor is whether a parent should give their home to their children. My clients have many reasons in mind as to why they might want to do this from ensuring the house passes to the children to attempting to avoid paying for care  or just getting the children to take over responsibility for the property so they don’t have to worry about maintenance issues any longer.

Providing you have no mortgage on your property, you are at liberty to gift your home to your family if you want to do so. But there are a few issues you may need to bear in mind before making that decision:

You will no longer be the legal owner of your home

If you gift your home, you need to consider the possibility that your child may divorce. If this happens, they may be forced to sell your home as part of those proceedings. Equally, your son or daughter’s ex-spouse would have a legal claim against their estate, which would also include your home.

If your child has financial problems and had an issue with bankruptcy, your home would form part of their estate. This could then potentially be claimed by creditors seeking to claw back money from their estate.

If your child predeceases you, their beneficiaries would then become the owner of your home.

If you wanted to obtain equity release on the property, you would be unable to.

If you needed to release some equity from your home, perhaps to help pay for adaptions if your health needs changed, you would not be able to do this. As you wouldn’t own the property, you can’t take equity release on it.

You need to consider Inheritance Tax

You may think that if you transfer your home to your children, then it won’t form part of your estate for inheritance tax purposes should you survive 7 years after making the gift. Unfortunately that is not the case. Due to the reservation of benefit rules, if you “give” away an asset that you continue to use, it is still treated as part of your estate for inheritance tax purposes. By gifting your property to you children during your lifetime, you could also lose the new residential nil rate band allowance as well.

You need to consider Capital Gains Tax

Before gifting your property, you also need to think about other tax, such as capital gains tax. This applies where a property is not a “principal primary residence” and could apply if, for example, your child is not living in your home when it is transferred into their name but has increased in value when they come to sell it.

Will I avoid care home fees?

You need to tread carefully before passing your home onto your children for this reason. The Local Authority could view this as “deliberate deprivation of assets” to avoid having to pay residential care home fees.

Put simply, transferring your home to your children in this way may be seen as an attempt to conceal funds to avoid paying for care.

If this is deemed to be the case, the Local Authority can reverse the transfer of ownership back to you or they can include the value of the home in your financial calculation anyway but including it as “notional capital”.

So gifting your home involves a number of considerations and a decision to do this should not be taken lightly. I would recommend seeking advice from a specialist Solicitor about these issues beforehand.

Rebecca Head is a private client Solicitor with many years experience and can be contacted on 01543 440 308.