Has your attention been caught by the very slick marketing of specific Trusts which appear to offer the hope of taking the family home out of the Inheritance Tax (IHT) net, alongside removing the value of the home when it comes to means testing for the funding of long-term care?
They can be described as Lifetime Trusts, Family Trusts or Asset Protection Trusts but broadly all aimed at achieving the same thing.
The big questions are do they work and if you already have own should you review its possible effectiveness?
Will a trust really protect your home from care fees?
Let’s firstly consider their general effectiveness at avoiding care fees.
Cash strapped local authorities have the power to investigate gifts, transfers into trust or other transactions over an unlimited period if they believe an individual has attempted to reduce their assets or income to avoid being charged for care costs (deliberate deprivation).
Ultimately, this could result in the local authority deciding that the original owners of an asset still own the asset that had been transferred into trust and the value of that asset will be included in any means testing for care funding.
Frequently we’ve seen the providers or promotors of these Trust solutions, who can be will writers, financial advisers or solicitors, stipulate that they need to be the Trustee, which will then require them to be directly involved in any future decisions, including selling or remortgaging the house.
Fees, both initial and ongoing, can be “chunky” and regrettably, there have been several examples where the provider has gone into liquidation of even imprisoned, leading to serious complications further down the line.
We’re not suggesting that you simply tear up and destroy any current Trust set up that you may have, as each individual’s situation may be different.
What we do recommend is:
- Extreme caution if you are attracted to any of these promotions and equally importantly
- A review of your current arrangements to determine if the trust you have is still required and
- What are the options and implications of terminating the trust during your lifetime.
For additional information on this subject, we recommend:
- Listening to this 2017 Radio 4 Moneybox episode The care fee trap and
- Reading this excellent article from Thomson Snell and Passmore and
- Taking a look at this recent Daily Mail story
If you have a question about your investments please either complete the enquiry form below or call us on 01825 76 33 66.