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

Have you not read up thread?

Yep.

https://www.ageuk.org.uk/information-advice/care/paying-for-care/paying-for-a-care-home/deprivation-of-assets/

If they own a property they won't be eligible for a first time buyers discount/stamp duty exemption.

They also won't be eligible for legal aid should they ever need it. A friend of mine forgot that his parents house was in trust for him and his sister and got sent to prison for claiming legal aid when he wasn't entitled to. He just clean forgot he was the official owner of the house.

@supersop60 so who do you propose pay for your care should you need it? Me and the other tax payers who are not eligible for state care themselves?

I really wouldn't do a trust. I'm a trustee of 3 discretionary trusts (these trusts have been set up for really good reason, to care for someone who is mentally incapable). Trusts really don't make financial sense unless you have a real reason for needing them.

You want the state to keep out of your affairs but you want them to pay for your care? You can’t have it both ways 🙄

DC getting divorced doesn't affect anything as they don't inherit anything from the trust until the second parent dies.

It depends on how the will is written. Often the Will will say something like:

"A 50% share to DC1 subject to him/her living at the end of the trust"

What this means is that the DC (or whoever else are beneficiaries) do not actually inherit the money until the end of the trust - which happens on the death of the second parent or any other conditions placed in the will.

Also, if the beneficiaries die themselves before the end of the trust then their estate does not inherit the money but it will be passed to any surviving beneficiaries of the trust.

If he wants to maximise the inheritance your son receives then it would be worth reconsidering

We are in the same situation and are about to do a civil partnership in order to have the joint IHT thresholds.

some people are writing that only a small percentage of older people need a care home but a lot more people need caters at home which is also expensive.

@BananaNirvana where did I say I want the state to pay for my care? I said I want control of my care.

Interesting though I wonder how you feel about all those who don't work and expect the taxpayer to pay for them all their lives?

Not all care homes are £5,000 a month. Some are cheaper. They have greater number of council funded clients. No home must accept council clients and some do not. It’s a business choice. Hers the Council formed a not for profit trust which runs care homes. They take the council funded clients. A few go to the expensive homes but not that many. There’s a variety of prices.

There is also cars at home and many people need this but have to pay for it. I do agree planning for old age is important and the property, if it’s the biggest asset by far, should help towards that. Giving everything away also makes it difficult fior dc to manage the care needed. It’s difficult to stand by and not do the best for your parents as you have money you cannot release and your parents have little. It’s foolish to go down this route.

Take a listen to this.

I actually recommend the whole podcast but there are many! episodes

This one addresses this specific issue

meaningfulmoney.tv/2024/08/07/big-mistakes-worrying-about-care-fees/#:~:text=Generally%20the%20cost%20of%20care,that's%20not%20a%20bad%20outcome.

How did your zoom call go op?

Zoom call was good, very informative. We are probably going down the route of changing to tenants in common , each leaving our half to DCs.. it's more about them being able to inherit rather than avoiding care costs. Also set up POA.
A bit more discussion to be had before we sign anything, but my mind is put at ease.
Thank you all for your input.

Need to be tenants in common to pass your share to another person rather than spouse

@sleepwouldbenice that podcast is interesting. It actually reflects very accurately the advice given to us by solicitor.
I'll listen to more of them!

if you just leave your half to your husband in your will kids could force a sale when they inherit
they might be older / married and need the money

If you want your husband. / you to retain the right to stay in the house you need to have a life interest trust which starts when you die / he’s died ( it’s in the will and the lifetime intrest trust is created by your death automatically ) you don’t actually do anything

basically it gives the surving spouse the right to carry on living in the house
your child doesn’t technically inherit till your husband dies / or the house is sold for care home fees

By having a lifetime interest trust it means yours kids can’t just move in or force a sale to get to half of the house .The trust ensures that the surviving spouse has the right to legally remain in the property even though they only own half of the property

and generally the surviving spouse is responsible for the maintenance insurance of the house and general upkeep of the house
( all of this is generally written into the will - it was with my late parents )

but buy doing this your ensuring that your child is going to inherit at least half of a property at some point in their life
only half of the house belong to your dh could be assessed for care home fees

Also should your DH remarry - new wife /family can’t inherit your child’s half of the house if your DH died either

I have a friend whose DH insisted on this arrangement. When he died, she would have liked to move - but if she sold the house, half the proceeds would go to her DC, and half the money would not buy her anywhere decent to live. I don’t know what the legal position of the DC giving or lending her the extra money would be, I expect fairly complicated . Anyway, it wasn’t going to happen , because one of them made it pretty clear they would claim their legal inheritance.

So she is stuck in a house which is too big, difficult to maintain and heat, for the foreseeable future. Oh, and there has been a massive falling out between the DC , and with her DD and her partner over the whole ghastly business.

Edited to add that this was the lifetime trust option.

"...but if she sold the house, half the proceeds would go to her DC, and half the money would not buy her anywhere decent to live."

My understanding is that is not the correct position (depending on how the will has been written).

"Anyway, it wasn’t going to happen , because one of them made it pretty clear they would claim their legal inheritance."

Depending on what the will actually said, the DC would not have any inheritance at all to claim until your friend dies (or any other condition of the will is met). The DC are referred to as "Remaindermen" and are only entitled to inherit from the trust after your friend dies

It is normal to allow the trust to sell its share of the home and invest the proceeds in a different property.

Even if the trust chooses not to invest the money in a new house then that does not mean that the Remaindermen get the money at that point. The trustees would need to invest the money and give your friend the income from the trust until she dies.

It is only after she dies (or any other condition is met) that the Remaindermen get their hands on the assets.

Then she was badly advised or the will was written without a trust properly

the dc don’t inherit anything until the other person dies.

with a lifetime interest trust the surviving spouse has the right to live in the house
they can move & the trust is moved to the next property

@Snapncrackle has it right.

There is so much poor information on this thread.

Life interest trust with tenants in common 50/50 split is the way to go. Often the trustees are the adult kids and the surviving spouse.

Surviving spouse has right to remain and must keep property maintained and insured. I have recently discovered that the property insurance could be higher as not every insurance company will cover a property partly owned by a trust.

Thank you I’m only familiar with this as my late parents had it in there will
my son was the beneficiary
I was the trustee / executor so I had to deal with it all when my mum passed away

I think people are confusing setting up a trust and giving away the house to DC so that they no longer own it ( bad idea )
This can also cost ££££ as I think you have to do an annual tax and trust estate form for trudge to HMRC each year

&

and setting up wills with a 50 -50 share each
mirror wills
and a lifetime intrust trust which is written in the will and only becomes active of the death of the first person

once one person dies by virtue of their death the lifetime interest trust is created m
no one has to do anything as such the trust is automatic as it’s in the will of the dead person

you can update the land registry’s with the trustee being on the deeds as the legal owner / not the beneficial owner ( if this is the case )

This should cost around £500 or so inc the separating of the tenancy of the house on the land registry and writing the wills

Re one partner dying - the DC will be Trustees, but not beneficiaries until the 2nd person dies.
They would not be able to force a sale, or profit from a house move while one person is still alive.