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

You don't actually have to go along with him then. He can do as he wishes with his share of the house, but not with yours.

A friend works in a very expensive care home
She loves it.
It has no smell
High staff to resident ratio
Staff undergo training for three months before being taken on.

She assists people with going to loo, feeding &c She speaks highly of the residents- they are cared for very well but massively expensive.

We own the house jointly, so we have to come to an agreement.
It's not really for this thread, but he can be quite intransigent about certain things, and I have to really dig in to even make myself heard.
(heads over to Relationships...)

You don’t
you can leave your half to whoever you like by changing the deeds to 50 -50

You mentioned upthread you're not sure whether you're JTs or not. But you either currently own as tenants in common or you can unilaterally sever the joint tenancy and it become a tenancy in common. It will then be your choice and yours only what you do with your half.

Obviously if his behaviour towards you means you wouldn't feel able to do this, as you say it might be one for Relationships as much as Legal.

You are not married. Your share is your share. Do what you want with it and he can do the same. You are a single person and so is he. The state treats you as such regarding tax, IHT etc.

But what if your DC get divorced? Their ex could come after their share of your house.

I wouldn't want to have to worry about that after my spouse died.

I am surprised your solicitor adviced that you should do this.

My Mother in Law did this after her husband (my DH's dad died). It cost a fair amount and we discovered after her death that had she needed care it wouldn't have been effective anyway for a number of reasons. Primarily she wasn't paying any rent for the share of the property owned by her children, she should have been paying 2/3 of the market value rent to the Trust. We also discovered that the house was not correctly insured as you need to take out non-standard building insurance when you put the home in a Trust. Thankfully in the time since it was set up there hadn't been a need to claim but if for example the wonky chimney had collapsed then the insurance company wouldn't have paid out as she had just continued her normal policy. After her death while waiting for probate we took out the correct insurance and it was significantly higher than a regular policy was.

In short she and her children set up a trust that wouldn't have achieved what it was supposed to and any local authority would absolutely considered it deliberate deprivation of assets. The insurance issue exposed her to significantly huge risk. The main people to benefit from setting up that trust was the solicitors she had paid.

Check out retained benefits where a trust is concerned. This is where the settlors continue to benefit after the trust is setup. Often it isn't picked up by HMRC until the probate is being applied for but if they do prove retained benefits, then the trust is treated for inheritance taxation as if the trust never existed. Sometimes people think they are getting aways with it until they apply for probate and then it all starts to unravel. It is possible for the settlors to demonstrate they haven't benefitted but you do need to think about how this is done. This is why people who own stately homes under a trust often live in a little flat or annexe somewhere in the house which they pay a market rent to the trust ... of course they don't really just solely live in the flat but it's very hard for HMRC to prove they didn't just live in the flat and they actually continued to enjoy the entire property.

• Market rent has to be proved by the trustees by going to the market at the end of every rental period.

Great... tell me, who will end up paying for your care if you or your husband needed it?

It will ordinary tax payers who will need to pick this up, whilst your children enjoy getting on the property ladder.

I wasn't sure of the terminology. We are joint tenants, and I don't know yet how I would prefer to proceed.
What I do know, is that we won't be making any decision tomorrow in the online meeting unless I am 100% sure it's the right thing.

Sorry. To separate out your ownership, you would need to change to tenants in common. Then you can do what you want with your share.

All the posters talking about who is going to pay for the care but we are all currently paying for people who made no provision for their care, many of whom I suspect received a lot on benefits too over the years.

I don't think it's unreasonable that people want to be in control of their money. The OP has not said she won't pay for her care but if she has control she can decide. I think it's shocking that with a POA the state decides and can just take your money. It's well known that private payers subsidise those getting their care paid. I don't want to subsidise anyone else thanks.

In top of this the state insists on keeping people alive when they don't know who they are, where they are or who anyone else is. It's disgusting. I want to keep the state out of my affairs as much as possible and pass on as much as I can to my children. We've looked at trusts and it's so complicated, we too are looking at how to structure it.

Ah I see.

As joint tenants, either of you can sever the joint tenancy without the permission of the other. It's free. DP could also do this if he liked, so it's an ongoing choice for both of you to continue with the JT. I agree neither of you want to be doing this in a meeting though, it's the sort of thing people should take time to consider.

So many people worry about this but its actually a very small percentage of the population that end up in a care hone🤦‍♀️

The sensible thing to do is change to tenants in common which protects your half to do what you wish. Very unlikely that both of you would need a care home so at least half would remain to be left in will.

I’ve come across this twice in people close to me and each time it caused great problems for the surviving spouse / child of the deceased, by skipping over the person who needed funds.

It’s fine to leave to children or grandchildren if there’s plenty of money. Otherwise, it’s far easier both in the short and long term to leave to the partner and trust them to take care of the children by leaving it to them when the surviving spouse dies. Similarly, a grandparent should leave everything directly to their own child and trust that child to look after their own children i.e. the deceased person’s grandchild.

I don't think there are any council owned care homes any more. They are all private businesses and take all residents. Those who are self funded generally pay more than council funded residents (so subsidise) but it's the same home.

This is what we found when looking for a care home for my late mother. We also found that cost and decor were not the important thing. Far more important was the care, turnover of staff, management.

Some of my family work in council owned care homes but my MIL is in a private home. I know which one I would prefer.

Sell the house to buy something small for you and DH and give DC their house deposits now.

We looked into this but it's very difficult. To downsize from a 4 bedroom detached home to a 2 bedroomed cottage or bungalow in my area is the same price, so would be pointless.

@supersop60 my parents did what you’re proposing to do, on the advice of a solicitor. I was always very nervous about it but they were cash-poor and their sole asset was their house and they desperately wanted to leave it to me and my DSis.

We lost DM, and DF carried on living in the house. In the end he never went into care but after we lost him too, we had an extremely stressful time unwinding the trust, on the advice of a different and switched on solicitor, not least because a rule was shortly to come in imposing a 10-year charge on discretionary trusts. This was all very difficult to cope with emotionally in addition to sorting out probate and mourning a parent.

But as the link posted by CandidHedgehog does note, the 10-year charge is now in place. Some info here:

What is the 10-Year Charge?
A periodic tax, the 10-Year Charge, applies to the trust’s assets every ten years.
It applies to discretionary trusts and some others, aiming to tax the growth in value of the trust assets over time. This charge ensures that assets held in trusts contribute to the tax system, preventing indefinite tax avoidance through the sheltering of assets within a trust.
How is the 10-Year Charge calculated?
The calculation of the 10-Year Charge for discretionary trusts, classified as ‘relevant property’ trusts, requires evaluating the total trust assets against the nil-rate band and applying a 6% tax rate on any excess value. This rate is calculated as 30% of the lifetime 20% rate.
If the trust’s assets do not exceed the nil-rate band, no charge is due. However, professional assistance is often required for this complex calculation and reporting to HMRC.

As you'd imagine, my parents' property had appreciated a considerable amount in the time since the original trust had been created, so you need to bear this aspect in mind if it’s likely to apply to you.

Do people here really think that there's different care homes for people who don't pay privately?
That is simply not the case.
The NHS/SS pay one flat negotiated rate (which is cheaper than a private bed) but the standard of care remains the same, no matter who is footing the bill.
Some are excellent, some you wouldn't want your dog in.
You have some element of choice, but once you want someone to foot the bill that element of choice (to say which home you'd like) narrows off.

I don’t believe the council will pay for the more expensive homes. Their list is the cheaper end. The older person won’t get much choice. My DMs fees were £5,500 a month. The council won’t pay this. They use the cheaper homes and I know where I wanted DM to be! We have NO council run care homes, just differently priced ones but you absolutely see the difference.

Where I live, a modern 2 bed house is significantly cheaper than a modern 4 bed. Bungalows are always expensive due to land requirement. If you want a 2 bed cottage in place of your 4 bed modern house, the price isn’t that different. Trading down to a similar age is cheaper.

Most care homes are run by private companies and the average cost is £1, 387 per resident per week, not far off the £5.5K quoted above. So given that most people in the homes aren’t self-funders, it follows that they won’t all be in the (few) homes run by the local authorities.

You say you are happier to be uncomfortable in old age to get them on the property ladder, but have you considered how uncomfortable? If they deem you able to manage with one carer visit a day, you could be sitting in your own urine and faeces till lunch time as you can't get up for the bathroom. Trip just after they have been and have fun lying on a cold floor for 20 hours. Your children may well be "too busy" to visit and take of you.

Hopefully you live to a ripe old age, so they money may not be available until they are in their 60's anyway. It could also affect their eligibility for first time buyer rates and taxes, which will change over time. This really doesn't seem to be the golden goose your partner thinks itnis.