Making a will - asset protection trusts

[Ranger 6]

We're making a will and have been advised that putting the house into an asset protection trust will ensure that the kids receive full title in the event of our deaths. The side effect will be that the property won't be included in the IHT assessment and thus will reduce the liability there.

I'd be interested to know what the going rate is to build one of these trusts and also how much to create a lasting power of attorney in case the two of us lose our minds.

Thoughts from those who've done this or are in 'the business'?

TIA

[LoonR1]

Ranger 6 said:

We're making a will and have been advised that putting the house into an asset protection trust will ensure that the kids receive full title in the event of our deaths. The side effect will be that the property won't be included in the IHT assessment and thus will reduce the liability there.

I'd be interested to know what the going rate is to build one of these trusts and also how much to create a lasting power of attorney in case the two of us lose our minds.

Thoughts from those who've done this or are in 'the business'?

TIA

That's exactly how it works and the Inland Revenue still haven't wised up to this

[anonymous-user]

LoonR1 said:

That's exactly how it works and the Inland Revenue still haven't wised up to this

It does work if done properly - it's how all the posh people keep their money.

Needs specialist advice, not cheap but if you are wealthy enough it is cheaper than tax

[anonymous-user]

I stand to be corrected but as I understand it an APT does not help to avoid IHT.

And talking of wising up, the 'Inland Revenue' hasn't existed for over 10 years.

[vonhosen]

There are two different kinds of LPA , one for property & finance, the other for health & welfare.
You can do them yourselves online on the Office of the Public Guardian website. They costs £110 each (so £440 of you & your partner).
Not a bad idea for kids who've become adults to do them too.

[anonymous-user]

vonhosen said:

There are two different kinds of LPA , one for property & finance, the other for health & welfare.
You can do them yourselves online on the Office of the Public Guardian website. They costs £110 each (so £440 of you & your partner).
Not a bad idea for kids who've become adults to do them too.

but if you have a trust you will have trustees and the trust agreement will say what happens in the even of incapacity.

[Ranger 6]

desolate said:

LoonR1 said:

That's exactly how it works and the Inland Revenue still haven't wised up to this

It does work if done properly - it's how all the posh people keep their money.

Needs specialist advice, not cheap but if you are wealthy enough it is cheaper than tax

We're certainly not wealthy and that's why we're considering an APT. Please explain the 'done properly' bit - we've only spoken to one Will advisor and I don't want to spend thousands on setting one up to find we've been taken for a ride and could've spent hundreds for the same thing.

vonhosen said:

There are two different kinds of LPA , one for property & finance, the other for health & welfare.
You can do them yourselves online on the Office of the Public Guardian website. They costs £110 each (so £440 of you & your partner).
Not a bad idea for kids who've become adults to do them too.

Thanks - we've been quoted £250 each on those so a big saving straight away.

[anonymous-user]

Ranger 6 said:

desolate said:

LoonR1 said:

That's exactly how it works and the Inland Revenue still haven't wised up to this

It does work if done properly - it's how all the posh people keep their money.

Needs specialist advice, not cheap but if you are wealthy enough it is cheaper than tax

We're certainly not wealthy and that's why we're considering an APT. Please explain the 'done properly' bit - we've only spoken to one Will advisor and I don't want to spend thousands on setting one up to find we've been taken for a ride and could've spent hundreds for the same thing.

vonhosen said:

There are two different kinds of LPA , one for property & finance, the other for health & welfare.
You can do them yourselves online on the Office of the Public Guardian website. They costs £110 each (so £440 of you & your partner).
Not a bad idea for kids who've become adults to do them too.

Thanks - we've been quoted £250 each on those so a big saving straight away.

You Can do LPAs yourself, not complicated you just need to be organised.

It will cost you a few hundred at the most to get a proper trust advisor to go through everything with you.

In simple terms you will need to gift your house to a trust then pay market rent until you snuff it. It's more complicated than that, but that is the basic drift. And don't die within seven years after giving your stuff away.

You could just give your kids the house now, and then move or pay them rent. They wont pay IHT then either, unless you die within 7 years.

[LoonR1]

REALIST123 said:

I stand to be corrected but as I understand it an APT does not help to avoid IHT.

And talking of wising up, the 'Inland Revenue' hasn't existed for over 10 years.

Well that's my argument completely destroyed. I incorrectly said Inland Recenue, when it's now HM Revenue and Customs. As a result these trusts work perfectly well and the government's tax office (whatever it's called) has no idea what you're doing. Well done on avoiding all tax.

Or maybe not.

[LoonR1]

desolate said:

It does work if done properly - it's how all the posh people keep their money.

Needs specialist advice, not cheap but if you are wealthy enough it is cheaper than tax

Multiple properties and "gifting" them in these trusts is probably fine. Doing it on your one and only home is considerably less successful.

Out of interest where is the outrage on the thread anyway about a person not paying loads and loads of tax? Especially one trying to do so in a more evasive than avoiding manner? Don't corporations get slated for simply avoiding tax, whereas this is an attempt to evade / place further burden on the Welfare State by avoiding potential care costs?

The OP's not wealthy, so I'd suggest he stops now before ballsing it right up.

[anonymous-user]

LoonR1 said:

Multiple properties and "gifting" them in these trusts is probably fine. Doing it on your one and only home is considerably less successful.

Out of interest where is the outrage on the thread anyway about a person not paying loads and loads of tax? Especially one trying to do so in a more evasive than avoiding manner? Don't corporations get slated for simply avoiding tax, whereas this is an attempt to evade / place further burden on the Welfare State by avoiding potential care costs?

The OP's not wealthy, so I'd suggest he stops now before ballsing it right up.

Wise words.

[rfisher]

Would cgt be liable in this situation?

[Clandyfielduk]

Another "thing" to consider: As you said "we" are you registered as "joint tenants" or "tenants in common"?
If the former, then ISTR the house passes to the survivor on the first death regardless.
If the latter, then each person can leave their "half" to others in their will.
With house prices being what they are, it seems to me that as the IHT threshold is (currently) £325,000 a joint ownership of a house worth say £400,000 would incur an IHT amount of £75,000 but only on the second death.
Tenants in common - with half being left to the children - would not incur any IHT on the property value (1/2 share being worth £200,000 and under the IHT threshold).
Am I correct??

[talksthetorque]

Clandyfielduk said:

Another "thing" to consider: As you said "we" are you registered as "joint tenants" or "tenants in common"?
If the former, then ISTR the house passes to the survivor on the first death regardless.
If the latter, then each person can leave their "half" to others in their will.
With house prices being what they are, it seems to me that as the IHT threshold is (currently) £325,000 a joint ownership of a house worth say £400,000 would incur an IHT amount of £75,000 but only on the second death.
Tenants in common - with half being left to the children - would not incur any IHT on the property value (1/2 share being worth £200,000 and under the IHT threshold).
Am I correct??

The IHT threshold can transfer from the deceased spouse to the surviving spouse/civil partner, so the surviving spouse/cp could have an IHT threshold of £650,000

https://www.gov.uk/inheritance-tax/leaving-assets-...

[Clandyfielduk]

talksthetorque said:

The IHT threshold can transfer from the deceased spouse to the surviving spouse/civil partner, so the surviving spouse/cp could have an IHT threshold of £650,000

https://www.gov.uk/inheritance-tax/leaving-assets-...

Ah, thanks for that.

[anonymous-user]

desolate said:

LoonR1 said:

Multiple properties and "gifting" them in these trusts is probably fine. Doing it on your one and only home is considerably less successful.

Out of interest where is the outrage on the thread anyway about a person not paying loads and loads of tax? Especially one trying to do so in a more evasive than avoiding manner? Don't corporations get slated for simply avoiding tax, whereas this is an attempt to evade / place further burden on the Welfare State by avoiding potential care costs?

The OP's not wealthy, so I'd suggest he stops now before ballsing it right up.

Wise words.

The OP hasn't suggested anything like tax evasion, simply asking if an APT might avoid unnecessary tax. It would be futile to use an APT in an attempt to avoid potential care costs as the use of such a trust for that purpose is specifically excluded.

The comments about multiple properties and level of wealth are probably valid.

I've spent a lot of time researching the matter of avoiding various taxes, especially IHT. With IHT, I've reached the conclusion that the only safe way is to gift what you own, above whatever nil-rate band is in place, to your benefactors at least 7 years before you die and keep good records of doing it.

Of course that raises questions about a different kind of trust, which not everyone might enjoy.

[LoonR1]

REALIST123 said:

The OP hasn't suggested anything like tax evasion, simply asking if an APT might avoid unnecessary tax. It would be futile to use an APT in an attempt to avoid potential care costs as the use of such a trust for that purpose is specifically excluded.

The comments about multiple properties and level of wealth are probably valid.

I've spent a lot of time researching the matter of avoiding various taxes, especially IHT. With IHT, I've reached the conclusion that the only safe way is to gift what you own, above whatever nil-rate band is in place, to your benefactors at least 7 years before you die and keep good records of doing it.

Of course that raises questions about a different kind of trust, which not everyone might enjoy.

If it's a true gift, as it must be to qualify for the seven year rule, then whatever's gifted is theirs to use / abuse as they see fit. You have no stake in it, so trusting them isn't really an issue is it?

[Ranger 6]

Well, I seem to have poked a bit of a hornets nest here.....

The projection we had was that if we don't put the property (yes, our only property) into trust for the children (currently 12 and 15) then we(actually, they) could incur an inheritance tax bill of over £100k on our (joint) deaths. I'd like them to inherit as much as possible when we both croak (we're currently 52 and 50). Is that wrong?

My thinking is that if we plan wisely then we can limit their tax exposure and put whatever is left into making their lives, financially, a little better. Having searched it appears that the whole APT thing is currently used to avoid care home charges - we haven't got that far yet.

All advice is welcome - I'm still interested in the criticism as simply I'd like to see what you really think.

[LoonR1]

Ranger 6 said:

Well, I seem to have poked a bit of a hornets nest here.....

The projection we had was that if we don't put the property (yes, our only property) into trust for the children (currently 12 and 15) then we(actually, they) could incur an inheritance tax bill of over £100k on our (joint) deaths. I'd like them to inherit as much as possible when we both croak (we're currently 52 and 50). Is that wrong?

My thinking is that if we plan wisely then we can limit their tax exposure and put whatever is left into making their lives, financially, a little better. Having searched it appears that the whole APT thing is currently used to avoid care home charges - we haven't got that far yet.

All advice is welcome - I'm still interested in the criticism as simply I'd like to see what you really think.

Two questions

What are you projecting and when?

Why do you think that giving your house away and still living in it hasn't been explored and the loophole closed?

[anonymous-user]

Ranger 6 said:

Well, I seem to have poked a bit of a hornets nest here.....

The projection we had was that if we don't put the property (yes, our only property) into trust for the children (currently 12 and 15) then we(actually, they) could incur an inheritance tax bill of over £100k on our (joint) deaths. I'd like them to inherit as much as possible when we both croak (we're currently 52 and 50). Is that wrong?

My thinking is that if we plan wisely then we can limit their tax exposure and put whatever is left into making their lives, financially, a little better. Having searched it appears that the whole APT thing is currently used to avoid care home charges - we haven't got that far yet.

All advice is welcome - I'm still interested in the criticism as simply I'd like to see what you really think.

Spend a couple of hundred to get some proper advice.

But this internet warrior says that definitely won't work. I have some working experience of trusts and you need to be talking about more than just your main home and a million quid,

If you give the house to the trust it will need to be mortgage free and you will need to pay market rent as well. Plus it ceases to be yours, it becomes owned by the trust. And even simple trusts can become complicated quite easily.