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Anyone heard of having house in Trust for children?(22 Posts)
My parents-in-law have just made a will with someone who home visits. Costs £29. However, they have been advised that in order to keep their house 'safe' for their children it should be placed in some kind of Trust. It means that should they require to go into a nursing home they cannot be forced to sell their house to pay for it. The house would go to their children when they die. That cost £290.
Is this legal? Anyone know?
Have seen this used as a form of iniheritance tax planning and in that context your PsIL would need to survive for at least 7 years from the date of Trusts establishment to ensure no tax IHT is payable. The Trust would still be liable for capital gains tax on a subsequent sale however.
In respect of the keeping 'safe' aspect *I think* they would need to be able to show that it hadn't been done only to avoid paying for care. Also again I think in Scotland at least that they can't be forced to sell the house to pay fees but costs may be recovered after death. Remember there is also free personal and nursing care now available in Scotland - sorry if the Scottish connection is not any good to you, might be my memory playing tricks on me...
HTH but to be honest I would consult a trust lawyer to check the validity of what is being proposed as in my experience trusts are complicated and more expensive than £290 to establish. Also check policy with local authority.
mears - trusts on property and assets are done, but TBH it is not simple law generally and I wouldn't feel comfortable trusting a will writing agency at all.
Avoiding nursing home fees and reducing tax is legal and it is something a good lawyer will seek to do when creating wills. But personally I do not feel that a law writing agency would have the expertise and the experience to guarantee a well written document. Sorry. It may well be right, but... well, Dh is a solicotor who specialises in this area. He has done so for a number of years and has studied at uni for 4 years prior to that. He is adamant that home made wills and wills made by many will wirting agencys generaly make him more money when they come to probate than anything else. Some solicitors call these companies "their best friend" for this reason.
For all wills, especially anything that is not just a very basic one, a solicitor who specialises in Wills and Trusts is the best person to see. I suggest that take their documents to a proper solicitor, with experience in this area of law, to check it all over.
IMO, better to be safe and spend a small amount of money now - than be hit big time in the future.
Dh isn't in right now - at gym - but I can ask him more later if you want. Mumsnet have spoken to DH's firm (he has written some articles on wills and related topics for them) so he is for real.
You can no longer put a property in trust to avoid IHT and continue living there - it is classed as a gift with reservation and as irishbird said your parents would have to pay a market rent to the trust in order for it to notcount as part of their estate. Avoiding nursing home fees is slightly more complicated - the local authority would have to be satisified that the trust was not set up for the sole purpose of avoiding nursing home fees - which would be difficult to prove in this case as that's why they are doing it. I'm presuming here that none of their children live in the house with them? Cos that would make it even more complicated.
So whilst it's definately legal, it would be unlikely to have the desired effect. If they do want to look into this then definately visit a proper solicitor. The home visit company will is probably OK though, as long as their wishes are fairly simple (eg all to surviving spouse then split between kids) but I would also see a solicitor for this if their estate is likely to be above the IHT limit (£263,000) as a properly drafted will could save them money.
Thanks for replies - more info would be good Hulababy.
I am concerned that they have entered into an agreement that is not valid. I really do not like the fact that they have even been encouraged to do this as personally, DH and I do not want them to keep the house in Trust for us to benefit financially. It seems to me that they are not considering properly their possible care needs later. I am in Scotland Goez, your memory is not paying tricks on you. Personal care is free although a nursing ome would have to be financed.
I think they may have been 'stung'. Will need to find out more from them as to what they have actually signed up to. It was only last week so perhaps they can back out.
This is what we have done. When my Dad died he left everything to Mum. Mum changed his will so that he left his half of the house to us 3 children. So now she owns 50% and the other 50% is split between the 3 of us.
You can change a persons will up to two years after their death - giving more but not taking anything away.
Now we only have to pay IHT on half the house.
The one possibly major problem with this arrangement is that if I was to get divorced my partner would have a claim to a small part of Mum's house.
Have spoken tp PsIL this moring. The man who came is an Estate Planner and he says that solicitors tend to be too busy to get into theses agreements! They have got a receipt for their money but it will be 28 days before agreement is sorted out. They have been told that if they survive for 7 years there will be no inheritance tax. Hula - is your DH around? I will serach for some interenet information. Doesn't sit well with me. FIL said that the man suggested that the children who will benefit should pay the cost.
I am not a IHT specialist but do know enough to state that there is no way IHT can be avoided by settling one's main residence into trust - as long as your P'sIL continue to dwell in and enjoy the property then the house remains part of their estate on death. There were previously a couple of agressive tax planning schemes around that, via the complex use of trusts and reversionary leases etc (very expensive to implement), IHT could be avoided but the tax loopholes that these exploited have now been firmly closed. IHT avoidance is certainly not a straightforward issue and certainly requires agressive individualised (and pricey!) tax planning to even stand a remote possiblity of successding.
Their main thinking was not avoiding inheritance tax but was to ensure that they would not be forced to sell their house to pay for nursing home fees. Although personal care is free in Scotland, any assets would be used to pay for their residence. They never thought of it till the Estate Planner suggested it. I asked them what they plan to do if they are in need of care then. They are assuming the state will provide for them. I really think they have been conned into something they do not understand. I would rather their money looked after them if need be.
Found these two snippets online ......
Deprivation of assets
If the person with dementia gives away money or property before going into care in order to pay less towards the fees (for example, signs the house over to someone else), the local authority can treat him or her as if he or she still has it when they assess how much he or she should pay. But they can only do this if they can reasonably consider that avoiding the fees was part of the reason. However, many local authorities say that all older people ought to be considering that they might need long term care in the future. These local authorities will count any money given away as part of a persons assets, unless there is another strong reason for giving it away (for example to avoid inheritance tax).
If the money or property was given away less than six months before the person went into the home, the local authority has the power to claim back its value from the person it was given to. If it was given away more than six months ago, the local authority can still count the amount as part of the persons capital in their assessment, which means that they may not help with home fees, even though the person no longer has the money
People can also be treated as still having money or property they no longer possess if they gave it away to get Income Support.
How to avoid long term care fees
Children often ask if it is possible to avoid nursing home fees by transferring the parental home into the name of one or more of the children.
Rather than a simple transfer of property a transfer into trust should be considered. Your trustees then have a discretion as to how best to provide for you and your family in the future.
Such avoidance can work but it should only be done after careful consultation because individual circumstances vary enormously.
There is anti-avoidance legislation to prevent the most obvious methods of avoiding the costs of long term care and there are traps for the unwary.
Before considering a transfer of the parental home an older person must take legal advice. In particular:
What is the immediate effect of making the gift and what are the possible long-term risks and objectives of doing so?
Will the gift become subject to the "notional capital" rules with the possibility of enforcement proceedings being taken by the Local Authority or the Benefits Agency? The "notional capital" rules could mean that you will be assessed as if you still own the asset given away.
The effect of divorce is often overlooked. An older person might transfer his or her home into the name of an only child only to discover that the child is divorced some years later. The divorced spouse could claim that the parental home is a matrimonial asset and seek to have it sold.
The bankruptcy of a child could have a similar effect.
The death of a child could also result in that childs next of kin (e.g. son/daughter in law or grandchildren) becoming part owners of the property.
Mears, I have no knowledge of Scottish law, so this advice is given on the fact that I have parents who might one day need it. I don't want my parents to keep assets tied up for me (house, money, whatever) until they die just so that I get them. I'd feel responsible to provide them with decent living and healthcare and would, honestly, rather use their money (house, whatever) for that. Ie, I'd rather inherit less and keep them happy more. As you would, I think.
I'm not sure how to handle it. Have they already done it? Could you consult a good attorney and ask?
Thanks Roobie - I think they should not continue with this.
mears - avoiding nursing home fees and avoiding IHT are two completely separate issues. From your first post is sounded more like a nursing home issue - and that is very often done.
Sadly, Dh is out at his work's annual dinner/dance thing tonight so can't ask him. You can e-mail him direct at work if you like next week. If you just e-mail and say you are from Mumsnet he will give you as much info as he can (obviously can't give you specifics if not his actual client, but can let you know what is and isn't legal, and the likelihood of your PILs stuff being ok or not.
As I said before DH specialises in this area of law and MN are aware of him as he has written some articles on wills, probate and related matters for them recently. Other MNetters have used him for their own wills, etc. too so he is real.
I am not advertising his services to you by the way. He will give whatever advise he can to for free. He is busy at the moment though, so may take a day or two to reply.
Please CAT me if you would like his work e-mail.
Ah - just read you are in Scotland. DH practises in English law only I'm afraid.
mears I thought free personal care was now the thing in Scotland anyway so the reason for placing the house in Trust sounds spurious.
if the company who set this up is claiming it is to keep their house safe for their children they won't object to your dh and his siblings phoning up and asking for an explanation.
Did your pils originally get contacted by this firm on exiting a supermarket by any chance?
We have a VERY bad experience of these will writing agencies.........my Gran died last year and when the will was found out of the cupboard it was discovered it hadn't been signed - and the 'company' which had done it for them (they were both in their early 80's when these wills were written up so eldery and frail) hadn't 'noticed'..
As you will see JJ we posted at the same time. Your setiments are mine entirely.
Hula - thanks for that offer but as you know we Scots have a law unto ourselves
Jasper - the nursing care is free - the accommodation is not.
Wish they had asked us first!
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