Life interest trust question

[Velmy]

Posting on behalf of a friend (with permission), sorry for the lengthy backstory.

My friend (+ young DC) moved back in with her parents about 8 years ago following the death of her DH, partly for some emotional support and partly to help look after them in their old age.

Some time just prior to her moving in, her parents (who owned the property 50/50 as Tenants in Common) had set up what she thinks is a 'Life Interest Trust' for their property.

They had some language put into their wills about this arrangement being in lieu of payment to their daughter for time spent living with/caring for them, as they were advised that this would avoid any 'depravation of assets' issues.

Despite living much longer than expected, her mother sadly passed a few years ago. She never went into care, so the issue of care home fees never came up with her.

Her father's health is now deteriorating rapidly and she has started to broach the subject of him going into care.

As she understands it, the value of her father's half of the house (+ his other assets) would be used to calculate his liability for care home fees. She would move out and sell the house so that these fees could be paid from his 'share'.

However, her father is adamant that the house is effectively hers due to the trust and that he is just a 'lifetime resident'. He believes that she cannot be forced to sell the house that she lives in with her child, and that any liability for his care would only be calculated against his other assets.

Who is correct?

It's impossible to say without sight of the Wills.

If her mother passed away in the last few years, who did she leave her half of the house to? Was a solicitor involved with the probate? This should have been looked at then.

Their daughter is/was the only beneficiary in both of their wills. No other living family (granddaughter aside).

Solicitor was a friend of her parents. She's unfortunately been very passive in all of this. Partly due to her nature and the fact that she is financially secure regardless, partly due to her father insisting on dealing with everything on his own after her mother's passing.

It Sounds like the parents may have transferred their ownership of the property into a trust some years ago with them and their daughter having the right to live in the property for as long as they want (lifetime interest) but no legal ownership. If that’s is the case and the transfer into the trust was done long enough ago then her father is probably right that the sale of the property cannot be forced as he does not own the house. It all depends on how long ago they did this though. I haven’t dealt with this area for over 25 years but back then the council could only consider it deprivation of assets if the transfer had been done within 10 years of going into care.

You’ll need more concrete info. She ‘thinks’ was a life interest’. She needs to find out exactly what was done. Not what she thinks. Can she find papers detailing everything.

It Sounds like standard will planning around this issue. Each own half the house as TIC. When first dies, their half is left on a life interest trust for the survivor. This means they have a right to live in property and depending on terms a right to income from any investments. They do not have a right to the capital. The person who gave away their half is dead so this is not ‘intentional deprivation of assets’ On second death this half passes to children. The survivors own half remains owned by them so this is theoretically up for grabs on care fee assessment. A disregard is applied in certain circumstances but this does not generally cover an adult child.

the other possibility is that they transferred the whole property to a life interest trust in their lifetime and not under the terms of their will. This might make sense with the wording around caring for them. Local authorities do not like these. It may depend on how long ago they did it, their health at the time and the exact terms as to whether this would be successful, it would certainly not be guaranteed to work.

a solicitor will be able to advise if they are shown the documents. It will all be down to what the will/ trust says and is only speculation otherwise.

As she understands it, the value of her father's half of the house (+ his other assets) would be used to calculate his liability for care home fees. She would move out and sell the house so that these fees could be paid from his 'share'.

It isn't really a calculation or anything proportionate. If he has money and assets over ( something like £28,000), he pays his own care home fees until he has spent down to the threshold. (£28,000).

Who owns what is will/trust dependent.

With my MiL although she owned her own house, her savings paid for her care until she died. These were just beginning to be exhausted and the house put on the market at that point.

Your friends father may be able to pay, without anything affecting the house.