Putting a house in trust

[LezUlez]

Hi, this is my first thread so I apologise in advance if someone has posted about this elsewhere, I didn't see anything.

My DH and I are making our first will. We are both in our 60s. The solicitor is keen that we put the house in trust. He says that this will protect kids and help us avoid care home fees. I am bothered though, that the house wouldn't legally be ours anymore but belong to the trust. I feel that legislation could change the care home thing in future anyway so that the model is different.

Has anyone gone down this route and found pitfalls? Or is it something to be recommended? I know that if I'm the survivor I would certainly not remarry. I think it's unlikely for my DH as well but no one can be sure I guess.

Thanks for your comments, and btw I'm not saying that I am determined to dodge care home fees, but this has been suggested by the solicitor.

I think it is worth considering that if you die and your husband remarried but did not make a new will then all the assets would automatically go to the new wife. Plus of course vice versa if he died and you remarried. Perhaps consider a will such as @Mumblechum0 suggests.

We got our wills done recently and the will writer was pushing this option so hard! I had not even heard about it before and wanted to research it more but she had more or less just put us down for it. When she started talking about the extra costs though I was …. Hang on… I need to research this.

It does have advantages like only half your property can go on care home fees so your children will definitely inherit half the house at least. But the last remaining of wife or husband also loses some control over what they can or cannot do.

It’s also a tricky moral dilemma. In the end we said No we just wanted simple mirror wills. But I can see it becoming a scandal in future how many people are sold these wills without understanding all the implications, financial & otherwise.

I think this is what our will writer wanted us to sign up to. But it costs more - it was supposed to be a free will service then suddenly the costs jumped to £700 - and when the first person dies it also costs money to activate the trust part of the will. And if the remaining partner wants to sell the house to release capital (downsize) half the equity in the house is not available for them to use as it goes into the trust.

1. They get paid more for doing this, so of course they recommend it.
2. Why wouldn’t you want to use the equity in your house to pay for better care for you?

if you feel that strongly about leaving money to your children and not spending it on yourselves when you need it, catch a flight to Switzerland, there are people there who can fix it for you.

Funnily enough that is my plan & my husband’s also.

this
You have to do an annual tax and estate form with a trust and register the trust with HMRC within 2 years of the death of the first spouse

the trust starts immediately after the death of the first spouse

this was the case for my parents a few years ago

That’s not totally correct
the trust starts automatically when the death of the first spouse dies

you have to register the the trust and do a race and estates tax for every year with hmrc and you have 2 years to do this from the death of the first spouse

if the surviving spouse wants to move / downsize they can do it and the trust simply goes over to the new property but this bit would require a solicitor

and it shouldn’t have cost that much
my parents had mirror wills with a trust upon the death of the first one and ie cost around 350 back in 2018
cant imagine that it would have doubled in price as it’s a very simple and standard thing to do

Agree. If I have to go into a care home in the future then I am prepared to pay for it, which will likely involve selling my home. If there’s anything left over after I have died my children will be lucky to inherit this.

I think you may have misunderstood the advice your solicitor gave - have you asked for clarification as to why they think a trust is appropriate?

@Another2Cats has correctly summed it up.

Ok I was (am still) a bit confused about it all. But still, it costs £700 to set up compared to zero for a simple will (in our case as it was free wills month). And then the remaining spouse has to do an annual tax and estate form with a trust and register the trust with HMRC within 2 years of the death of the first spouse.

HMC are awful to deal with in my experience! And then the remaining spouse has to pay a solicitor more fees in order to downsize. And according to our adviser, they have to get permission from the beneficiaries "although I'm sure that won't be a problem" ...well it could be in some cases.

Doesn't sound like a decision people should take lightly.

This is incorrect.

My parents did this. So have we actually but ours hasn't been used, my parents has as Mum died 3 years ago.

Her probate cost a bit more as we needed to create the trust.

Insurance has been a bit more complicated as the owner isn't just Dad and involves the trust.

Dad now lives with us as he has dementia and the house will need to be sold. I've spoken to the solicitors who say that we should be able to sell with no issues. I presume we will put the money in savings and half in trust savings.

Can I see any issues...yes, one in particular.

Dad is likely to need a care home at some point when we can't cope. His savings and his half a house will probably last 3 care home years. And this is where we hit a potential issue.....

If his money runs out there is no guarantee the local.authority will.fund him in the home he chose. Even if they do today, we know how bad the social care burden is on the local authorities and thats only going to get worse. At that point would we accept a move to the LAs choice of home? I guess we will at least have a choice but I am sure we will use the trust money Mum protected to keep him in the place we chose as best for him for a year or two longer. Assuming we can! It's not an issue yet. It may never happen. But it is a worry I have with the way funding is going.

Which part, please? (I find it confusing so not surprised if I have something wrong).

there is a difference between a trust which takes the property outside of the owners hands as such and the trust is responsible for the house and irs upkeep and has a say over what happens

and a trust that starts on the death of one of the owners it’s often called a lifetime interest trust
basically you each own 50 -50 or whatever percentage independently and can decide who inherits it after you die

with a lifetime interest trust
you can leave your half to your kids or whoever you want but your spouse had the right to carry on living in the property for his lifetime until he dies

the trust protects your half as your spouse doesn’t own it he only owns his percentage

so if he remarried the new wife can’t get 100 precent of the house and leave it to her kids and he only owns 50 percent .
and neither can a care home take 100 percent if he needs care only his half is taken into account

I’m only going on my experience which was fairly recent ( in the last 5 years )
Im fairly certain they don’t need permission to downsize
the beneficiaries aren’t getting anything until the second spouse passes

I know with my parents they paid 350 for mirror wills with a trust

when my mum died the solicitors updated the deeds on the land registry so they both my sister & I were on the deeds with my dad

however although we were on the deeds as owners. We were not the beneficial owners due to the trust and not being beneficiaries of the trust

being on the deeds meant that if my dad remarried his second wife couldn’t get her hands on my mums half of the house ( if this makes sense )

It was the trust that starts on the death of one of the owners called a lifetime interest trust.

But what the adviser said to us is that the beneficiaries (adult children) have to agree if you want to do something like go on an expensive holiday with the money left over after selling the house - because technically half that money is theirs? This is where I got confused.

That,

the solicitor would want that op and it sounds pretty good.

My FIL set up the kind of trust whereby his half of the house went to his three adult children in trust, and his wife (MIL) kept her half.
He died, and she is now in a home. The house will have to be sold soon to free up her half to pay the care home.
I don't know if the LA / care home will try to come after the other half owned by the three adult offspring, or if they will succeed.

The issue is that MIL will likely live for many years in the home, and this trust has fees to be paid every year. Also, the cash savings FIL left are invested in the stock market, inside this trust, as well, and are losing money.
So all in all, with fees and stocks going down, they are wondering if it was all worth it.

Beware, these sharks are just after yearly fees for "managing" the trust.

My parents did this in 1998 and my father died soon after. His half is in trust for me and my brother, the other half is owned by mum. She can downsize of she wishes, but then half of any future house/money left over goes back into the trust. I’ve never heard of filling in anything for HMRC each year though and we’ve never done it. We’ve seen the solicitor several times in the intervening years and this has never been mentioned.

This is something different.

Op go back to your solicitor and ask for clarification on what they are proposing. This is what you are paying them for.

I suspect they are proposing mirror wills saying when A dies their share of the property be left to the children. That means one half of the property is protected from care home fees. It is very common and good advice. It also protects A's half of the property being inherited by B who then remarries and rewrites their will leaving everything to his new wife.

Is it possible to do this without a trust?
So that on the death of the first parent, the offspring are just added to the deeds of the house in place of the dead parent, and that is that, no annual fees before or after the first death (apart from initial fee for will writing)?

I’m amazed at some of the ‘legal’ advice given out on mumsnet…. But this time I agree with your advice!
Im always amazed that posters look for legal/financial/medical advice from random people on message boards!

Yes because it's the will document itself that creates the trust. There are no tax implications other than normal inheritance tax should it be relevant.

Edited to add there's the usual probate to go through of course as with any person's death who has a will with relevant assets.

Yes this all makes sense and it is what we have done. It was also recommended on our NHS retirement course, although we had long since done it I don't want a bereaved DH to leave all my money to the cats home or a fancy woman. I want my share going to DS.

@Another2CatsIn the life rent trust, is there any requirement to register the trust with HMRC as a previous poster has said? Or would the solicitor do everything that’s required?