Property in Trust to avoid care home fees

[ClawsandEffect]

I was talking to a friend the other day and she mentioned she is putting her house in a trust for her son, so it can't be sold for care home fees later, should she need them.

This isn't possible, is it? I thought the LA could claw back even many years later to fund care.

So the life interest in possession trust is only applicable for a couple, rather than for me as a single person? That seems unfair, as is inheritance tax rules which means my children will be paying a huge amount of tax as my estate ( house, pension and savings) is above my limit but not the limit for a widow.

This is my situation too - really bloody unfair. My kids won't inherit anything from their father but unless I marry him again his IHT allowance is lost so they will pay more IHT than if we were still married.

I had been chucking more in my pension as that would have been outside of my estate but even that's going to be taxed on death now, after 2027.

You should look at some of the NHS care homes.. then decide if it’s “too good to be true”.

Did you know that most care homes are privately owned?

I would hope that it would be picked up as deprivation of assets.
Also very foolish to leave oneself at the whim of the government when you might need 24/7 care for twenty plus years?!
Morally it's messed up of course. It's your responsibility to use your money for your own care. Does their son value their own ability to own a house over their mother's comfort at the end of her life?

My mum is in a care home which is being self funded by the money she and my dad accumulated before he died. Yes it’s expensive but I am very grateful that I got to choose the care home after looking into the local ones and visiting a few. If you rely on the local council to pay you don’t get any choice.

She was also able to move in when the time was right for her as well as get daily care visits to the home she shared with dad when we could see they would benefit from it. I imagine the council have such limited funds and so many older people needing care - be it daily visits or in care homes - that the care is only provided when the situation is absolutely desperate and the weeks and months leading up to getting care arranged are not pleasant for the older person.

As someone else said having the money to pay for it means you get the care of your choice at the right time for you.

Each of us see our half as rightfully our children’s. We have already paid tax and done everything responsibly related to our home. We’ve never claimed benefits, never owed anyone any money or defaulted on mortgage payments. What incentive is their to pay off your home for your children?

So so selfish.

so basically you’re saying that the State should pay for your children to inherit because you’ve paid taxes and never b can pained benefits????

Who paid for the hospital in which you and your children were born? Who paid for their education?

I don’t have children. Why should I pay anything for yours?

Have a serious think about where that kind of logic gets you.

What other reason is she putting the house in a trust for her son? It’s not like spouses.

Some people get all of their care paid for who have owned/contributed nothing. It is morally wrong to take things from people who have often already been taxed twice on their one home, when extremely rich people think nothing of hoarding money in tax free off shore accounts abroad, people who are properly rich!

I can leave my half of my property I’ve already paid for to whoever I like, and that is my children. Not my husband. He’s the same. I’ve paid for it and it’s mine.

You know nothing about my life. I have been abandoned/disinherited by both sides of my own extended family, through no fault of my own. Actually victims of crime by our own family. So hell will freeze over before my own children will be done out of anything.

Also, we don’t actually plan on using care. We’ve always cared for all our own elderly family members in-house. I personally cared for my FIL for months in his own home, as he was terrified of going to a care home. I would happily struggle on like my FIL so my children get everything.

Also, our solicitor said many more do this now because if they die young and their surviving spouse remarries, it logically protects your own half from a future spouse and/or potential children getting their hands on it. Again, hell would freeze over before I would fail to protect my own in that way. It’s completely legal 👌🏻🙌🏻

Are you sure you are not me!! Our experiences are very similar.

My ex died three years ago and left everything to his new wife. As his widow, she has the extra inheritance tax relief. I also paid as much as I could into my pensions and left one fund untouched when I retired. I plan to do drawdown in the future if I need the money, starting with taking the 25% tax free. If I leave it untouched, it would have been outside my estate for inheritance tax - but no longer after 2027 thanks to Labour.

I worked as a teacher for over 20 years until I retired so was not a super high earner, just made some good investments and was able to pay off my mortgage in my 50s thanks to taking out an Offset mortgage when I got divorced.

When my aunt needed a care home, I'm glad she was self funding. Yes it doesn't feel like you would want to be self funding, until it happens.

Although you're pretty much left on your own as a self funder in finding suitable homes, SS did help by suggesting ones they were familiar with.

All of these suggested were either inadequate or required improvement according to the CQC. On visiting them, we wouldn't have wanted a relative to live in them. If SS was paying for her care, those are the homes she would have been sent to.

We were glad for the choice. And again when she needed more specialist care and needed to be moved. What wasn't good though as a self funder we had to arrange a private ambulance to move her from home to home. That wouldn't have been the case if the state were paying.

My mum and dad had some dodgy solicitor trying to sell them one of these trusts. For a fee of 3 grand! I went to speak to a decent solicitor who advised against it and said that it’s very likely the money/assets in it would be seen as deliberate deprivation and would be clawed back. Your friend needs to get proper legal advice, from someone who has nothing to gain from the transaction.

@Ihateslugsyour ex’s wife doesn’t get ‘extra’ inheritance tax relief when everything passes from her husband to her. The tax calc is just delayed until she dies. Everyone gets the same £325k allowance. Yes it gives her time to spend or give away some of the total assets to avoid HMRC getting 40% of it on her death but she doesn’t get any extra allowance.

Estate planning can help everyone although yes the removal of the pension being outside your estate is annoying as now plans need to be revised.

Financial advisor told mum to put dad’s half of the house in trust to me when he died. It’s perfectly legal.
She has put some of her savings in trust for grandkids education later too.
Both parents have paid tax all their lives. One was a teacher the other worked for the NHS. It’s their money. They can do whatever they like with it.

If people are putting half the house in trust for DC instead of leaving it to spouse I assume the spouse is well provided for in other areas or has sufficient pension income to have a good lifestyle.

If taking out half of what is likely the most valuable asset in a couple’s life would mean the remaining spouse has a pretty shit retirement that’s not great. So if remaining spouse wanted to downsize as didn’t have the income to maintain a decent lifestyle and then use money left over from the sale to maintain that lifestyle, that wouldn’t be possible as half the proceeds would go into the trust.

Although I know that inheritance tax is delayed until the spouse also dies, at that point the spouse will have her husbands £325,000 allowance as well as his £175,000 main residence allowance ie £500,000. When she then dies, she has her own allowances plus the unused allowances from her husband ie £1 million.

Normally the way the trust is written, the home can be sold and the deceased’s share invested with the interest receivable by the surviving spouse.

"So the life interest in possession trust is only applicable for a couple"

No, it doesn't have to be a couple, but that is the most usual situation. It applies to any two or more people who jointly own a property.

What you would need to do is to add your child (or children) as an owner to the deeds and also the mortgage if you have one.

They will then own whatever share of the house with you as tenants in common.

There is no stamp duty to pay unless their share of the mortgage is more than £125,000 (so, if you are giving them 50% of the house and your mortgage is less than £250k then you're fine). Although there may be if they already own a home as this will then be a second home for them and they would likely be hit with 5% stamp duty on the value of any mortgage that they take over.

However, giving your child a 50% share of your house counts as a gift for IHT purposes. So it will still be counted as part of your estate if you die within seven years.

My parents had a life interest in possession trust in their wills. Mum died and her half of the house went into this type of trust.

My father has dementia and lives with us. One day he will need a care home, when we cannot cope, or he chooses to. His half a house and savings will be used to fund a place of choice.

Now, in theory, my Mums half a house is "safe" ... but from what? From my Dad potentially being moved from "his new home" after his savings and half a home have been spent?

It isn't going to happen is it? We will, of course, use Mum's half a house to keep him where he is settled.

So, make plans, indeed our wills say the same. However in reality as a PP says money buys choices. The LA doesn't necessarily step in and keep people in the care home they originally chose. I suspect it will be even worse in years to come when the pressure on social care is only going to get worse.

Did you or your family ever use the NHS, receive maternity care, dentist, free prescriptions, schools, child benefit, ssp, smp?

Of course. Society has a moral duty to look after its youngest members, our next generation. Never more so than during a cost of living crisis and given that we have an increasingly ageing population. Any investment in our young children’s health, education and well-being is positive for us all 👌🏻

We did this too. DH had a terminal illness and wanted to protect his half of the house for our kids. I have a lifetime interest and his half can't be used for any care home fees I may incur in future. My half is bequeathed to the kids but can be used for care home fees if needed.

I didn't think you could do it as your friend has due to deprivation of assets. Morally wrong too IMO.

This was in response to people who say they've never claimed or received benefits

I was referring to benefits people claim when they are both unemployed.

I actually have less issue with parents who do claim benefits, certainly not those who are on their own (and therefore doing the job of 2 people), than I do with super rich tax-dodgers. The cost of living crisis is causing many parents who do work to also need benefits. It is a disgrace, and any loophole/win which helps their family gain is fair play in my opinion.

Isn't the usual reason for setting up life interest trust in half the property for the kids is to avoid the issue of remaining spouse getting married again and then leaving all their estate to new partner/family. So by setting up the trust the dying spouse knows that their half of the estate will go to their DC rather than risk it going to a potential new spouse. The main aim is not that care home fees are avoided.

With a single parent can't see what point of setting up a trust for DC is other than avoiding care home fees.