Putting house in trust for DCs

[supersop60]

My DP is worried that our DC will never get on the housing ladder. There will be no money from grandparents (mine both died 30 yrs ago, and his took out equity release on their house which needs to be paid back on death).
DP is convinced that putting the house in trust for the DC will ensure that they definitely inherit, because we won't have to pay care fees.
I don't think he's correct. From my own research, it seems that councils can go back any number of years and look for 'deprivation of assets' and take the money anyway.
Any advice?
Edited to add that we're having a Zoom call with a solicitor tomorrow, and I can tell that DP is desperate to get this sorted asap.
I'm 65 and he's 61

He made it very clear 25 years ago that he didn't want to get married.
Both names are on the deeds.

I don't know the ins and outs but I would be concerned that as your children would be beneficiaries they may no longer be entitled to any first time buyer incentives, and I believe if you own a certain % interest in a property via trust you will also need to pay stamp duty at the additional rate when purchasing their home to live in. It's not my area but recall a few bits from colleagues.

My parents have done something where when one of them dies, their half goes into a trust for me and my sister. The remaining parent has the right to live in the house etc. Means the maximum that can go to care fees is 50%.

You have to own your house half each rather than jointly.

For me I am not bothered about inheritance, I'd rather care home fees were paid and there wasn't any stress. But my Dad is obsessed with avoiding everything going to a care home.

If you transfer it into a trust during your lifetime, this is likely to be regarded as ‘intentional deprivation of assets’. Whilst you are both alive, if one of you needed care and the other is still living in the house it can’t be taken into account for care fees anyway.
the best plan which does work to protect Half of a joint estate is that on first deaths the house is left on a ‘life interest trust’ for the survivor. They have a right to live in the property but do not own it and it is not taken into account for the assessment of care fees. You can protect all the assets of the first to die in this way (eg could choose for sole name bank accounts to also pass to the trust). The house must be owned as tenants in common not joint tenants. It is easy to change this if necessary.
this is not intentional deprivation of assets because the half share belonged to the person who died, not the survivor if they need care.
also the trust means that the survivor has a right to live there and if children have nasty divorces etc the asset isn’t theirs either.

for IHT purposes if you are married, it is treated as an exempt transfer to a spouse so no IhT on first death. If not married there may be IHT depending on values. On second death the transferable Nil rate band applies if married.

for a solicitor, make sure they are a STEP qualified wills and estate planning specialist solicitor not eg a conveyancer who dabbles in wills. Not a will writer as they are not qualified, regulated and insured in the same way.

We've literally just done this (similar ages with dcs).

On our solicitor's recommendation we've changed from being joint tenants to tenants in common (I think it's that way round!). Very easy to do - we just had to sign a notice of severance and the solicitor made the necessary amendment with Land Registry. Our new mirror wills now say that when one of us dies our dcs inherit that person's half but surviving person has a life interest in property. So if I die first and dh eventually needs care the theory is only his half of the estate can be used for care fees. Also means that if I die and he remarries he can't leave everything to a new wife and her kids - just his half!

I think our solicitor said putting property in Trust was complicated and expensive.

Are you married? If not I don't think you would inherit each other's inheritance tax allowance?

He made it very clear 25 years ago that he didn't want to get married.

Maybe he might change his mind now if he's worried about dcs inheriting as much as possible?

Even if they will,, do you really fancy being dumped in the nearest care home that takes council funded patients thats 50 miles away and smells of piss and cabbage? Rather you than me.

Joint tenancy is the one where your share automatically passes to the other joint tenant. Tenancy in common is the one where either of you can leave your share to anyone you want, like DC or the dogs home.

If you're talking to the solicitors tomorrow, as you're unmarried I'd ask about IHT.

Thank you everyone. That's all very useful information. and I have made notes.

@supersop60 These are the negatives for unmarried couples. IHT Tax is the main one as you don’t have the exemptions but you very much limit your spending options. Being married is much better for financial planning.

I thought of doing this too

When my late mum & dad did their wills
They became 50 - 50 tenants and had mirror wills
each left their half to my son with the surviving spouse having a life time interest in the house

when my mum passed away my mums half automatically was in a trust ( by virtue of her death ) for my son

my father had the right to continue living in the property and if he wanted to downsize he could the trust just went to the new house

I was the trustee / executor of my mums half of the house

i was put on the deeds as the legal owner but not a beneficial owner ( important difference )

so either way whatever ever happened if my fathers needed care home / my son was going to get my mums half of the house when it was sold for my fathers care

When my father passed away 2 years later my son got the whole estate

he was still a FTB as I was the executor and sold the house through the estate as my son was the beneficiary of the residual estate and not the actual house ( if this makes sense )

To do this cost around £350 back in 2017

you have 2 years from the first death / creation of the trust to inform HMRC and you have to do an estate and trust tax return form each year ( think that’s what it’s called )

Personally I would rather my assets were used to keep me in a nice care home, are you happy to live your final years in any old home of your local councils choosing?

It depends on how the will is written
if they inherit the residual estate ( half the house ) then they are still FTB
but it’s important that they are not put on the deeds

my son was still a FTB dispite inheriting technicaly my parents house
but because it was sold by the estate / excutors ( me ) he got the cash and when he bought last year he was still a FTB

He made it very clear 25 years ago that he didn't want to get married.
Both names are on the deeds.

But it's much better for inheritance planning 🤷🏻‍♀️

But this is on death. Putting it into a trust while the parties are still alive is transferring ownership at that point.

To be fair I've never been in a nursing home that doesn't smell of cabbage and piss. The more expensive homes are just more aesthetically pleasing and have better facilities, the level of care is not necessarily better.

In saying that, I'd much rather my parents' home was sold and me to receive nothing in order to get the nicest place for them to spend their last days.

All those people desperately trying to avoid paying for care by playing the system, who do you think is going to pay?

There is talk of means testing the state pension &/or removal of the triple lock. We have an ageing population & a real issue with catering for that. People are deluded if they think the state provision will be halfway decent.

We’ve taken collective leave of our senses in this country - want champagne health and social care on lemonade taxes. It’s insane.

I agree, people want to make others pay for their care, expect others to work for a pittance caring for them & protect their dcs inheritance. it's one reason why are in this mess.

https://allanjanes.com/-Can-I-Give-My-House-To-My-Children-Implications-for-Inheritance-Tax-and-Care-Fees

one solicitor’s (very negative) view.

I don't actually disagree.
What DP wants to do doesn't sit quite right with me. He thinks he knows best, but he doesn't always.

There’s plenty of self-funders living in the same care homes as people who’ve had their local authorities paying for them.

There’s plenty of self-funders living in the same care homes as people who’ve had their local authorities paying for them.

This is now, in the next decade things are going to look very different. Councils are broke.

Just to clarify, my previous post only applies to putting the house you live in in trust for your children while you are alive. Leaving half to the children on the first death is sensible to avoid care home fees and when, as in this case, the owners are not married so the IHT exemption doesn’t transfer over.

Ah yes you are right

Trusts are subject to IHT.

If you’re putting less than £325k it’s highly unlikely that the IHT position will change. If you’re putting more in, it’s probably already not that tax efficient as a structure.

There is a consultation but it will be a huge change, and given the government still hasn’t given any details at all on the huge IHT changes they made back in October I’m not holding by breath on getting any detailed outcome from this consultation any time soon (also it has already been consulted on in recent history and the general outcome of that was that it’s too hard and costly to change significantly, so don’t bother).