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Trusts

Current Statistics say that one in four women and one in six men may require long term care in the future. Thanks to advances in medical science and a general improvement in health and fitness, everybody is living longer. Understanding the situation is important when you consider that the elderly population of the UK is set to rise massively over the next 30 years, do you want to gamble with your home if you need nursing care. Should a Local Authority arrange or provide a place in a care home, it must carry out a means test of your assets including your home to see if care fees are to be met by the person being means tested. There are some factors when the home can be ignored if the home is occupied by:
  1. A spouse or partner
  2. A specified relative who is aged 60 or over, or under 60 but is incapacitated.
  3. A child under the age of 16 and is cared for by the person going into care.
Even though the authorities cannot take possession of a property occupied by the spouse, they can and will place a charge on the property to be repaid on second death. If you are a widow or widower and need care, the Authority will include the current value of the home as part of their assessment of your ability to fund the costs of care. Bear in mind that the average care home charges between £500 to £700 per week so you can see how quickly any liquid assets will be eroded very quickly and the home put at risk last year at least 70,000 homes were sold to pay for these fees! For the majority of people their home is their main asset. We know that you want to ensure that as much of your home as possible passes to your children and hence is protected from being taken by others. Here are some examples of how your home can be taken:
  1. Care Home fees.
  2. Re-marriage (the new partner/spouse could end up with your house)
  3. Your surviving spouse having more children, diluting the share that should go to your children.
  4. Bankruptcy (creditors trying to get their money back)

CAN’T I JUST GIVE THE HOUSE TO MY CHILDREN AND CONTINUE LIVING IN IT?

Giving the home away to the children is sometimes seen as the solution, but it is not, it is illegal to deliberately transfer ownership of your property to avoid paying care fees.The Local Authority can look back and if they can show that this was done to deliberately avoid care fees they will reverse it. At a time when ALL Local Authorities are cash strapped, they will become increasingly vigilant. There are other more compelling reasons not to give the house to your children.
  1. They can sell the house without your permission
  2. If they get divorced or go bankrupt or even die, your house is part of their assets and who knows what might happen
  3. When they come to sell the house after your death they may have to pay capital gains tax as it is not their primary residence

CAN YOU AVOID THESE COSTS?

The Property trust can only be created whilst both partners remain alive and the property must be owned as Tenants in Common. The Trust instrument is then included in both Wills but does not come into force until after the death of the first and is perfectly legal. It is perfectly legal for your partner to state in his or her Will that when they die, their share of the property, typically 50%, is placed into the Trust to be administered by the Trustees nominated in the Will, and this usually includes the surviving spouse. The Will also specifies who is to be the ultimate beneficiary of this share in the property and the Trustees duty is to protect the property for the benefit of the beneficiaries.The surviving spouse, under the terms of the Trust, has the right to remain living in the property for the rest of their life. On the death of the second spouse the trust comes to an end and the property passes absolutely to the beneficiary to achieve this you will need to change the ownership of your home into Tenants in Common.Does half a property have a value? In 1993 the High Court ruled that because half a home cannot be sold or rented by itself, there was no value to it and a market valuation today may well follow this ruling. In which case, the value of the asset would be zero and the total value of the property protected. Why a Protected Property Trust? As well as protecting the home, the Protected Property Trust safeguards the interests of the surviving joint owner, ensuring that the survivor has the right to live in the property without payment of rent for their lifetime. The Protected Property Trust is flexible and will allow the survivor to move home, buy, sell, upgrade and downgrade. Only after the survivor dies does the first share of the property pass to the children or other beneficiaries. The survivor cannot be forced to sell or move without consenting. The Protected Property Trust can also protect the residential rights of a current partner if the property share is to be left to children from a previous relationship or other beneficiaries 

OTHER TYPES OF TRUSTS

Trusts are created in your will on your death, or during your lifetime and are used to protect a vulnerable beneficiary for instance. Your Trustees look after the assets for the benefit of the vulnerable person, and can choose when to pay out some or all of the assets to the beneficiary. The type of trust used will depend on what you want to achieve. A trust can be used to:

  1. Protect assets for children from previous relationships.
  2. Provide money for a disabled beneficiary, without affecting their entitlement to benefits.
  3. Protect a vulnerable adult from potential predators.
  4. Protect assets where the beneficiary has a poor record with money.
  5. Provide for minor children.
  6. Protect assets for future generations, or to skip a generation.
  7. Allow flexibility as to how your assets are distributed in future
  8. Potentially reduce care home fees (although this dependant on situation and does not work in every case – please contact if you would like further information)

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