Property trusts - any value in doing for a regular house?
Discussion
Hi all,
Apologies if this is a dumb question, I really don’t know about such things…
Often you hear about rich people buying their properties via trusts to protect the assets, and I also understand some folks set up trusts to get around inheritance tax.
My parents have just sold up their home in Oz and are returning to the UK to see out their days (both in late 70s now). My step father has early on-set dementia and will likely need carers (or be in care) at some point in the future.
They’ve got about £500k cash. They want to spend about 400k on house and have the rest as a rainy day fund. They won’t hit the inheritance tax threshold as it stands, but I imagine a fair bit of the care bills could get very high as time goes on.
Would setting up any kind of trust, and purchasing their house through the trust offer any value/benefit to them? Or would the costs of setting up/administering any such scheme be prohibitive given the amounts involved?
I’m concerned about their rainy day fund being exhausted by my step father’s care fees. My mum only gets a state pension, whereas he has army and a private pension too. No one knows what might happen tomorrow of course, but I worry my mum may struggle financially should she outlive my stepfather for a long period of time.
For full disclosure, inheritance is not an issue for me. The will my parents have means that their estate will go to my step father’s children when neither he or my mum are around - he was the one with the house/assets before my parents married - which is fine with me.
I would recommend to them to get a professional to put any arrangements in place of course, but right now I don’t even know if this is something that I should suggest to them or what kind of thing they should be asking for.
Thanks for any input.
Apologies if this is a dumb question, I really don’t know about such things…
Often you hear about rich people buying their properties via trusts to protect the assets, and I also understand some folks set up trusts to get around inheritance tax.
My parents have just sold up their home in Oz and are returning to the UK to see out their days (both in late 70s now). My step father has early on-set dementia and will likely need carers (or be in care) at some point in the future.
They’ve got about £500k cash. They want to spend about 400k on house and have the rest as a rainy day fund. They won’t hit the inheritance tax threshold as it stands, but I imagine a fair bit of the care bills could get very high as time goes on.
Would setting up any kind of trust, and purchasing their house through the trust offer any value/benefit to them? Or would the costs of setting up/administering any such scheme be prohibitive given the amounts involved?
I’m concerned about their rainy day fund being exhausted by my step father’s care fees. My mum only gets a state pension, whereas he has army and a private pension too. No one knows what might happen tomorrow of course, but I worry my mum may struggle financially should she outlive my stepfather for a long period of time.
For full disclosure, inheritance is not an issue for me. The will my parents have means that their estate will go to my step father’s children when neither he or my mum are around - he was the one with the house/assets before my parents married - which is fine with me.
I would recommend to them to get a professional to put any arrangements in place of course, but right now I don’t even know if this is something that I should suggest to them or what kind of thing they should be asking for.
Thanks for any input.
What happens if he dies first and his wife your mum is still alive given the conditions of his will? This might have a bearing on the UK property and how you buy/rent it.
Do his pensions have a casting benefit to his widow- I would expect the army one to have it?
Lots of useful information on the Age Concern website for care home fees. From the off I can understand you want to protect your mother's financial interests that she has a place to live and enough money to live in relative comfort but the LA will have a starting point of deprivation of assets when you start looking at trusts etc. which by the sound of it in your circs the costs to set one might outweigh any benefit.
Do his pensions have a casting benefit to his widow- I would expect the army one to have it?
Lots of useful information on the Age Concern website for care home fees. From the off I can understand you want to protect your mother's financial interests that she has a place to live and enough money to live in relative comfort but the LA will have a starting point of deprivation of assets when you start looking at trusts etc. which by the sound of it in your circs the costs to set one might outweigh any benefit.
Armitage.Shanks said:
What happens if he dies first and his wife your mum is still alive given the conditions of his will? .
In these cases normally the will will say that the house cant be sold until the wife passes away.Often there is also an element of funding left for the spouse too.
Thats how it is in one I have seen anyway.
porterpainter said:
Would setting up any kind of trust, and purchasing their house through the trust offer any value/benefit to them? Or would the costs of setting up/administering any such scheme be prohibitive given the amounts involved?.
My old dad did similar. He had 2 reasons1/ To stop his house being sold if/when he went in to care.
2/ Because he thought my sisters husband was a wrong'un
His solicitor created a trust to hold his assets, unencumbered house ~£200k + ~£50k liquid with the solicitor as trustees. The terms of his will said 50/50 split between me and sis when he went. But it was phrased that I'd get my half but sis would have to ask the solicitor for her half. The solicitor had total discretion to pay/not pay sister. My dad thought this would prevent hub getting his hands on the money then hopping it.
He lived for another 10 years, the last year in care. In the event he turned out to be totally wrong about sister's hub - he turned out to be a good guy. I got my half after probate sis had to ask for hers in dribs and drabs, took ~5 years for her to get her share and was a nightmare for her. Dad should have changed his will when he realised hub was a good guy.
The trust did fulfill the objective of saving his home when he went in to care and clearly dad wasn't rich so not just for rich people.
Armitage.Shanks said:
What happens if he dies first and his wife your mum is still alive given the conditions of his will? This might have a bearing on the UK property and how you buy/rent it.
Do his pensions have a casting benefit to his widow- I would expect the army one to have it?
Lots of useful information on the Age Concern website for care home fees. From the off I can understand you want to protect your mother's financial interests that she has a place to live and enough money to live in relative comfort but the LA will have a starting point of deprivation of assets when you start looking at trusts etc. which by the sound of it in your circs the costs to set one might outweigh any benefit.
Thanks for the reply. The will says something along the lines that my mum can live in the property until she dies (in nicer legal speak).Do his pensions have a casting benefit to his widow- I would expect the army one to have it?
Lots of useful information on the Age Concern website for care home fees. From the off I can understand you want to protect your mother's financial interests that she has a place to live and enough money to live in relative comfort but the LA will have a starting point of deprivation of assets when you start looking at trusts etc. which by the sound of it in your circs the costs to set one might outweigh any benefit.
I wasn’t aware of casting benefits, I thought pensions stopped when the pensioner died. I will mention this to my mum so she can check. Thanks too for the pointer to AgeConcern - seems obvious to look there, but I hadn’t thought of it until you mentioned it
jonsp said:
porterpainter said:
Would setting up any kind of trust, and purchasing their house through the trust offer any value/benefit to them? Or would the costs of setting up/administering any such scheme be prohibitive given the amounts involved?.
My old dad did similar. He had 2 reasons1/ To stop his house being sold if/when he went in to care.
2/ Because he thought my sisters husband was a wrong'un
His solicitor created a trust to hold his assets, unencumbered house ~£200k + ~£50k liquid with the solicitor as trustees. The terms of his will said 50/50 split between me and sis when he went. But it was phrased that I'd get my half but sis would have to ask the solicitor for her half. The solicitor had total discretion to pay/not pay sister. My dad thought this would prevent hub getting his hands on the money then hopping it.
He lived for another 10 years, the last year in care. In the event he turned out to be totally wrong about sister's hub - he turned out to be a good guy. I got my half after probate sis had to ask for hers in dribs and drabs, took ~5 years for her to get her share and was a nightmare for her. Dad should have changed his will when he realised hub was a good guy.
The trust did fulfill the objective of saving his home when he went in to care and clearly dad wasn't rich so not just for rich people.
porterpainter said:
Thanks, this is exactly the sort of experience I was wondering about so it seems it’s possible.
Definitely possible. Only thing to watch for are the fees. When the trust was finally wound up (ie all the money distributed) ~ 5 years after his passing sis and I asked for a breakdown of all the fees in establishing the trust during dad's lifetime, drawing up his will, acting as executors then as trustees. Obviously every communication was billed to the trust at an hourly rate.
They paid further fees to an "investment manager" to look after half the money while sis was asking for her half, needless to say the returns were pitiful and led to an erosion of capital. We were not entitled to that information - dad was the client and clearly he couldn't make a request from beyond the grave. In effect dad wrote them a blank cheque.
In fairness the trust did save his house/cash. In the circumstances (dad was strong as a horse physically but rapidly going blind) he could have lived in care for many years which could conceivably have wiped out his entire assets without the trust.
He'd have hated to see his money go this way so you'd have to say money well spent.
This is fairly simple to sort out and the house can still be sold by the survivor. The Will just needs to direct the assets to a family trust with the survivor being a potential beneficiary and trustee, no need for Solicitors to control the trust, just have a switched on trustee.
The house is owned tenants in common.
You can use an IIP for any excess over the nil rate band but it doesn’t sound like it’s needed here.
OP- send me a pm if you want and I will give you details of a very safe pair of hands to take care of it, it needn’t be expensive.
The house is owned tenants in common.
You can use an IIP for any excess over the nil rate band but it doesn’t sound like it’s needed here.
OP- send me a pm if you want and I will give you details of a very safe pair of hands to take care of it, it needn’t be expensive.
Caddyshack said:
This is fairly simple to sort out and the house can still be sold by the survivor. The Will just needs to direct the assets to a family trust with the survivor being a potential beneficiary and trustee, no need for Solicitors to control the trust, just have a switched on trustee.
The house is owned tenants in common.
You can use an IIP for any excess over the nil rate band but it doesn’t sound like it’s needed here.
OP- send me a pm if you want and I will give you details of a very safe pair of hands to take care of it, it needn’t be expensive.
Just to clarify I think the house has to be owned as tenants in common, not joint ownership for this to work.The house is owned tenants in common.
You can use an IIP for any excess over the nil rate band but it doesn’t sound like it’s needed here.
OP- send me a pm if you want and I will give you details of a very safe pair of hands to take care of it, it needn’t be expensive.
"Gifts with reservation of benefit" - check it out.
If every Tom, Dick and Harriet could stick their house into trust, continue living there and sidestep IHT everyone would be doing it.
And as someone has rightly mentioned above, watch out for fees and charges right through the process. From the advisers' point of view it's the gift that keeps on giving.
If every Tom, Dick and Harriet could stick their house into trust, continue living there and sidestep IHT everyone would be doing it.
And as someone has rightly mentioned above, watch out for fees and charges right through the process. From the advisers' point of view it's the gift that keeps on giving.
IANAS but when a couple are already in their 70s, putting property/assets in a trust is seen as blatant deprivation of assets by any local authority? Is not as though a likely need for care is not predictable.
https://www.ageuk.org.uk/globalassets/age-uk/docum...
page 6
https://www.ageuk.org.uk/globalassets/age-uk/docum...
page 6
LeoSayer said:
Caddyshack said:
This is fairly simple to sort out and the house can still be sold by the survivor. The Will just needs to direct the assets to a family trust with the survivor being a potential beneficiary and trustee, no need for Solicitors to control the trust, just have a switched on trustee.
The house is owned tenants in common.
You can use an IIP for any excess over the nil rate band but it doesn’t sound like it’s needed here.
OP- send me a pm if you want and I will give you details of a very safe pair of hands to take care of it, it needn’t be expensive.
Just to clarify I think the house has to be owned as tenants in common, not joint ownership for this to work.The house is owned tenants in common.
You can use an IIP for any excess over the nil rate band but it doesn’t sound like it’s needed here.
OP- send me a pm if you want and I will give you details of a very safe pair of hands to take care of it, it needn’t be expensive.
Panamax said:
"Gifts with reservation of benefit" - check it out.
If every Tom, Dick and Harriet could stick their house into trust, continue living there and sidestep IHT everyone would be doing it.
And as someone has rightly mentioned above, watch out for fees and charges right through the process. From the advisers' point of view it's the gift that keeps on giving.
That is why you direct the property to a trust on death and not put it in trust before. If every Tom, Dick and Harriet could stick their house into trust, continue living there and sidestep IHT everyone would be doing it.
And as someone has rightly mentioned above, watch out for fees and charges right through the process. From the advisers' point of view it's the gift that keeps on giving.
Michael_B said:
IANAS but when a couple are already in their 70s, putting property/assets in a trust is seen as blatant deprivation of assets by any local authority? Is not as though a likely need for care is not predictable.
https://www.ageuk.org.uk/globalassets/age-uk/docum...
page 6
It isn’t deprivation if done properly, the first to die directs to trust, they are not creating any deprivation. The survivor owns half a house, the trust ones the other half. It is not possible to sell half a house or atleast the effective value is nil (see crag report) the survivor is not depriving the state as they didn’t put the property in trust.https://www.ageuk.org.uk/globalassets/age-uk/docum...
page 6
There is a risk with the above if both owners need long term care as the house is then not protected.
Michael_B said:
IANAS but when a couple are already in their 70s, putting property/assets in a trust is seen as blatant deprivation of assets by any local authority? Is not as though a likely need for care is not predictable.
https://www.ageuk.org.uk/globalassets/age-uk/docum...
page 6
My dad was 83 when he placed his assets in to a trust. His wife/my mother had already passed away, not sure whether that would be a factor. His eventual need for care was fairly obvious at the time he established the trust. His concern was not losing his assets to pay for care/maintaining an inheritance for his kids. This was accomplished. In the event he only "saved" a year of care fees - but it could have been a lot more. https://www.ageuk.org.uk/globalassets/age-uk/docum...
page 6
I assume this is bread and butter work for solicitors with expertise in estate planning. He lived in an area that's popular with retirees so fair to assume local firms would have expertise in this area. Lucrative for them - but still valuable for the client/his heirs.
Caddyshack said:
It isn’t deprivation if done properly, the first to die directs to trust, they are not creating any deprivation. The survivor owns half a house, the trust ones the other half. It is not possible to sell half a house or at least the effective value is nil (see crag report) the survivor is not depriving the state as they didn’t put the property in trust.
There is a risk with the above if both owners need long term care as the house is then not protected.
And you wonder why the UK public services/finances are in the dire state they are, when such blatant (but apparently legal) avoidance is still possible.There is a risk with the above if both owners need long term care as the house is then not protected.
Interesting use of the word 'properly' by the way
I'd be careful on the Deprivation of Assets given that we know the elderly male in this case has early on-set dementia and is likely to need care provision or you are going to seek some form of state funding. The other aspect of someone with no assets and wholly reliant on the state for residential care will have that care provided by the LA at the cheapest rate which could include placement in a home many miles (out of area) from the family home.
If there were no immediate health issues the other option is any property is bought in a beneficieries name under gifting but obviously the 7-year gifting rules apply. They live in it 'rent' free but you own it. Given the circumstances in this case this idea might not be appropriate.
If there were no immediate health issues the other option is any property is bought in a beneficieries name under gifting but obviously the 7-year gifting rules apply. They live in it 'rent' free but you own it. Given the circumstances in this case this idea might not be appropriate.
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