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My 78 yo Dad is thinking about putting his house in trust, one of his friends has done it.
He's asked me to make an appointment with a solicitor, which I'm happy to do, but is this legal?
When my MIL did it with some random company (con man) it all went pear shaped and it was all investigated by the Police and cost her a fair bit to get out of it.
So what's the consensus, and if it is legal how does it all work?
It is entirely legal to transfer ownership of an asset to a trust and a solicitor will give you more details, including what he can legally achieve by doing this.
A key question for you is what does he want to achieve?
Assuming it's to avoid the LA helping themselves to the value of it if he needs care in the future? Perfectly legal and normal. Be careful, they can still claim 'Deprivation of Assets' for any period preceding the requirement for care. Apparently there's no time limit it's whatever they think...
My Mother put her apartment into Trust in 2013 and died in 2024. There was no issue with this from the LA but they still helped themselves to her other cash reserves.
Also, be aware the property value will still count towards probate value though its equity should be outside the estate as far as the will is concerned. I had to seek probate due to this.
Oh, and don't forget to sort LPA (both types) whilst you're at it. I'd do that directly (as I did with probate). Simple online forms, not worth tge expense of a Solicitorator...
A key question for you is what does he want to achieve?
This is the key question
If its in a trust, who manages that building (insurance/damage/maintenance)?
How much rent would be payable to the trust?
Unless its at "arms-length" on commercial terms HMRC will take a very dim view of it
My Mother's was structured to allow her to live in it until she chose not to or died. The equity was then passed to the beneficiaries of the trust. HMRC had no interest in that, it was a mechanism to avoid the LA from helping themselves if/when she needed LA care.
I am told by a lawyer working in this area this will not work in Scotland.
Seems it won't always work in England either.
"Brett Porter, 52, from Wiltshire, said: “They promised there wouldn’t be any future charges – that’s not true. We’ve spent several thousand pounds.”
His 96-year-old grandmother set up a trust with McClure when she was 84.
She is now in a nursing home but Oxford County Council has refused to accept the trust, which means her property will now be used as leverage to pay for her care fees.
it was a mechanism to avoid the LA from helping themselves if/when she needed LA care.
Obviously paying what's due for everyone else is for little people
My Mother's was structured to allow her to live in it until she chose not to or died. The equity was then passed to the beneficiaries of the trust. HMRC had no interest in that, it was a mechanism to avoid the LA from helping themselves if/when she needed LA care.
To be clear, when the Trust was set up, it was to secure the property for the trustees not to avoid any future LA liabilities. At that point, she was completely independent and had no need of any LA intervention. That changed when she broke her hip in 2023. She then paid her dues from cash reserves until she died.
I'm not a beneficiary so have not interest in the trust beyond dealing with it as part of the estate.
Thanks for your contribution tho Kilo. Next time I'm on the Ouija board I'll be sure to let her know how you feel so she can defend herself from some random on the Internet jumping to conclusions...
Next time I'm on the Ouija board I'll be sure to let her know how you feel so she can defend herself from some random on the Internet jumping to conclusions...
I wouldn’t bother, seems like a lot of work moving that planchette around for chat forum replies, try a medium, it might be quicker.
My 78 yo Dad is thinking about putting his house in trust, one of his friends has done it.
He's asked me to make an appointment with a solicitor, which I'm happy to do, but is this legal?
Is it legal? Yes, although being legal doesn’t always mean it will have effect hoped for and it can be expensive to set up right; and future changes in the law can bugger it up. Just because it (might have been) right for his friend doesn’t mean it is right for him. A good solicitor specialising in this sort of stuff should be able to advise him. But he’s asking you to make an appointment - that may set off their spidey senses and either wonder if he’s not fit to take care of significant financial decisions himself or if he was being coerced into it.
Is it morally right? Much harder to answer. Moving your assets into trust to avoid paying care costs or inheritance tax is essentially saying that you think that poorer people in society should pay for your care so that your children (or others) can get the benefit of your significant assets. Don’t expect any help on this question from a solicitor. Did the English cafe cost cap go ahead? It was going to be a lifetime cap of ~£80K - anyone with enough assets to make it worth putting some in trust may still be left with accessible funds anyway.
Did the English cafe cost cap go ahead?
My late uncle was caught by this - or should I say latte
All to save a few crumbs for his daughter, to be honest it's not worth getting in a froth over. He got all steamed up over nothing, the LA came after his estate and in the end it was toast
Bloody autocorrect - I’m so amazed when a post appears now that I’ve given up proof reading!
Putting your property in Trust is not a step to be taken lightly and is fraught with dangers. There are lots of firms out there selling this as the way to protect your family home from Care Costs, save inheritance tax, save on probate fees etc.
I recently authored guidelines on the sale of these trusts for the Professional Standards Board of the Society of Will Writers, these have been adopted nationally and are widely regarded as the definitive work on what can and can't be claimed when selling these types of trust. If you or a family member is considering putting their house into trust they are worth a read.
Be careful there are lots of salesmen and firms out there who will say anything to part you from your money.
@poly The care cap was kicked down the road by the last tory government, then Rachel Reeves scrapped it pretty much as soon as she got into office. There is yet another review of care funding due to report in 2026 or 27. Which will pretty much say what every review in the past 20 years has said, but it is another excuse for government inaction whilst the problem gets worse for people trying to access the system. The Kings fund has just published an excellent report if you are interested - https://www.kingsfund.org.uk/insight-and-analysis/long-reads/social-care-360
Thanks for the info guys.
@NJA that's really helpful information!
To answer a couple of questions - yes, it's about asset protection and trying not to spaf it all on care.
The reason he's asked me to make the appointment is to fit in with my work.
Is it morally right? Much harder to answer. Moving your assets into trust to avoid paying care costs or inheritance tax is essentially saying that you think that poorer people in society should pay for your care so that your children (or others) can get the benefit of your significant assets
who cares. The reason it is possible is so the richest can protect their assets and shelter them from tax liabilities or government fees of one sort or another. Until it’s closed why shouldn’t someone who isn’t super rich benefit. If the government cared it would close the loophole. The tories didn’t because the decision makers worked for the super wealthy. I’m not holding my breath that Labour will close them either
Interesting link from NJA.
Reminded me of Catch 22. If an advisor claims a trust will protect against care home fees they are potentially disqualifying it from doing that.
"The Society’s view is that by simply making this claim you are potentially providing the local authority with proof that avoiding care costs was a significant motivation."
If this is successful it would mean any care required wouldbe the bare minimum local authority funded. Self funded care is much better.
Hopefully it won't work anyway. There is no good reason not to use assetts to fund care. Do you really believe its right that taxpayers fund middle class kids inheritance? I don't
I have no idea about whether it will help with avoiding LA charges but it made things very easy housewise when my father in law died.
The house was in a 3 way split with him and his two daughters. All they had to do was send his death certificate to Land Registry instead of dealing with probate.
@tjagain my Dad is far from middle class - bus driver, car factory worker, council road worker and caretaker to name a few of the jobs he had over the years.
He, and my late Mom (secretary) worked bloody hard, saved, paid taxes and everything else - the only 'state benefit' money he has taken in his entire life is his state pension (which lets face it is what you pay your NI etc for anyway and still get taxed on it).
But why not make it about class - seems to be what Labour are pushing. But let's face it current labour wouldn't know working class if it smacked them in the face.......
I see you mentioned me in a reply but I cannot see it.
Funding of old age care looks unfair which ever way you look at it, either from the point of view of the folk who see their inheritance disappear or from the folk who see taxpayers funding care for those with assets
Its also hugely expensive to society. This is why no government has dealt with it
Its not about class and i am as middleclass as they come. As above its unfair whichever side you look at it from. I see no reason why the state should pay for care for those with assets and also state paid card is inferior generally.
If no one paid for their care it would need a huge increase in income tax to pay for it all.
I do understand that it seems unfair that your parents assets could be used for care but looking at it from the other direction it also seems unfair. Effectivly you are asking for the state to subsidise your inheritance
Devil's advocate to "I see no reason why the state should pay for care for those with assets" - is that why should those that have been sensible and saved to fund an inheritance of some sort be penalised over those that spaffed everything.
Property is of course a grey area on this because many / most property owners didn't actually save much of that current value, if anything it's out of line with what they paid and what the spaffers will have paid in rent by not being house owners, etc.
**
Anyway, that wasn't point of my answer.
Personal experience - my Mum and Dad's house was in a joint trust kind of thing but it made the process of enabling equity release that my Dad needs to do now much harder. After Mum died her share came into Trust 25% each for me and my sister, but we've had as trustees to undertake several different steps to advance the trust into ownership for us, then gift our shares to my Dad (which now counts as a gift by us under the 7y rule and hence part of our own IHT allowances etc, and not part of the property passing to spouse allowance as that's your residence, not other property you 'own') - so he can then do ER. Couldn't find a mortgage co that would do ER on a house in trust even if the trust were prepared to sign that the ER co get first dibs on death.
I literally owned 25% of the house for a day, and have created a £50k IHT liability for my estate.
And it has cost a fortune in lawyer's fees unwinding trusts and all the associated (7) different actions.
Bear in mind if you / your parent(s) might want to do ER in future (not so much OP, but anyone reading this)
I do understand that it seems unfair that your parents assets could be used for care but looking at it from the other direction it also seems unfair. Effectivly you are asking for the state to subsidise your inheritance
Effectively you are asking DP74s hard-working parents to pay for their own care when other people get their care for free. They've worked, they've played by the rules and they've paid taxes.
Granted, not everyone can work and not everyone that works can save for a variety of health and social reasons, but what if everyone gave their savings away to charities, children, whatever and spent the rest on holidays?
How would the state cope then? The state, rather than families, needs to sort this out
We looked at putting our house into a trust (in case either of us died young and the other remarried) to preserve potential inheritance for our children rather than a later spouse, but it seemed like it would create a complex legal situation and opted to live a long and carefree happy life instead.
The only experience I have is the will and trust my mum and step-dad have set up, so if my mum dies first, me and sibling will inherit the house but in trust to step dad. So he can live there. As others have said this can cause an issue if my step dad subsequently needed care, as I would want to be paying for care above the very, very basic level that the state provides, and might need equity to do that. You never know what future circumstances will be. I am of the mind that I want all of my parents and step parents to enjoy the money they have worked hard for, and I will have no doubt in using their assets to pay for more adequate care if the time comes. I completely accept everyone's choices have to be based on their circumstances. But there is a feeling in this thread that 'some people get free care', that level of care is really very, very basic and you really have to have virtually nothing to not contribute any costs at all (or have a partner still living in their home).
Is it morally right? Much harder to answer. Moving your assets into trust to avoid paying care costs or inheritance tax is essentially saying that you think that poorer people in society should pay for your care so that your children (or others) can get the benefit of your significant assets
who cares. The reason it is possible is so the richest can protect their assets and shelter them from tax liabilities or government fees of one sort or another. Until it’s closed why shouldn’t someone who isn’t super rich benefit. If the government cared it would close the loophole. The tories didn’t because the decision makers worked for the super wealthy. I’m not holding my breath that Labour will close them either
I care because I have something resembling a moral compass. Even richer people use it to dodge paying their way is not how I live my life.
my in laws were irrefutable working class, and followed the classic council house purchase scheme, inhereted very little from their parents, worked hard, were frugal, a final salary pension (not a massive salary but still), early retirement etc. They will tell you, as most people do, that their wealth was because they worked hard for it - there may be some truth in that but a lot of it was luck, buying the council house (arguably subsidised by the state), selling it at a good time in the property market to move up the ladder, the existence of final salary pensions in private sector, getting “forced” to take early retirement with full pension due to a downturn in industry etc. Without doubt their social mobility enhanced the outcomes for their children. If the in-laws died tomorrow the inheritance will be sizeable but neither of their children need it, they both already lead a more extravagant and. comfortable life than their parents did at the same time. Giving that money to affluent middle aged people whilst forcing the state, funded by EVERYONE including the taxes of much less well off people to pay for care is mental.
My own parents were arguably a little higher up the social standing as a starting point. They perhaps haven’t done as well from pensions, didn’t get right to buy etc but they did get some inheritance from their parents. None of their children need the money, likely if they die tomorrow much of it will be passed (indirectly) to the grandchildren - to help make sure they have the same “luck” their parents did. But if they end up with multiple years of care costs is it right to pass the bill for that to everyone, including those who will never inherit a bean from anyone so that my kids have a better deposit for a house and remain better off through luck of birth?
do I encourage either set of parents to hoard the wealth to pay for care or pass on? No. I encourage them to enjoy their retirement, spend the money now (which does seem to include generous gifts to grandkids), because I think a happy, active retirement probably delays the point at which care might be needed. If either said they were going to put large parts of assets in trust to protect from the state I would genuinely hope it was to set up a benevolent fund that had some qualifying criteria other than a family tree.
i certainly agree the state needs to sort this out but I don’t think the solution I would like and the one you want would be the same! The Scottish situation where nursing costs are covered is actually a logical approach.
He, and my late Mom (secretary) worked bloody hard, saved, paid taxes and everything else - the only 'state benefit' money he has taken in his entire life is his state pension (which lets face it is what you pay your NI etc for anyway and still get taxed on it).
They probably should have also claimed child benefit, but maybe they were too proud...that's their choice.
Regardless, they should also realise that their significant wealth did not arise from working hard and saving, but rather easy access to cheap borrowing and an asset price bubble that others will not be lucky enough to benefit from.
(think about it - how else does a caretaker amass such wealth)
People put things into Trust for all sorts of reasons. Jumping to the conclusion it's always and only to avoid paying theoretical future LA costs probably says more about the people jumping to those conclusions than the people creating the Trusts...
The OP asked about the legality of creating a Trust not the existential socio political justification for doing it. We see to have disappeared down the usual STW wormhole...
and he was asked straight away what the aim of doing so was. Ultimately all the reasons for doing it are to change how the default system works, so whatever the driving force - he wants to make sure he gets proper advice on if it’s the right thing to do not if it’s possible to do.People put things into Trust for all sorts of reasons. Jumping to the conclusion it's always and only to avoid paying theoretical future LA costs probably says more about the people jumping to those conclusions than the people creating the Trusts...
but actually the effectiveness (if not necessarily the legality) will depend on why he’s trying to do it. IF it’s about care costs and my relative was doing it I’d want them to understand the potential downsides to them and that we aren’t expectedly waiting for inheritance and would rather see them in comfortable care than basic care. Those seem like useful discussion points for a parent who is planning to do this because a friend did it.The OP asked about the legality of creating a Trust not the existential socio political justification for doing it. We see to have disappeared down the usual STW wormhole...
Hang on, it was you that said
Assuming it's to avoid the LA helping themselves to the value of it if he needs care in the future? Perfectly legal and normal.
You know when you wish you hadn't asked what you thought would be a simple question.....
So to answer my original question - yes it's legal.
Is it moral - that's a different kettle of ball games...
Just to jump back in on this again. The rules by which a local authority can and do challenge these trusts are deliberately grey. They actually like it that way. Essentially they say that any transaction made when care was 'reasonably foreseeable' and where the avoidance of future care costs was a significant factor in the decision behind that transaction then the local authority can set aside the transaction for the purposes of calculating their support.
Note it say set aside the transaction not overturn it. They don't have the right to force the dismantling of the trust structure, that could only be done by a Court Order. So the property will still be in a trust and controlled by trustees. This gives rise to what is known as 'Notional Capital' this is treating people as if they owned something that they no longer legally own (the property is legally owned by the trustees at this point). This means that not only has the person needing care given up the asset they will be deemed to be liable to pay the costs of care from assets they have no control over. This gives rise to huge problems.
First - the 2014 Care Act gives Local Authorities a duty of care to offer a Deferred payment arrangement whereby fees are offset by a legal charge over property and repaid on death. This can't happen when the property is in trust as the person needing care doesn't own the asset.
Second - As others have said on this thread it is impossible to get equity release on a property owned by a trust. If there is an outstanding mortgage or equity release the lenders will not give permission to transfer a property into trust.
Third - If the life tenant of the trust goes into care for more than six months the trustees will lose the main residence CGT relief so any disposal of the property will be subject to capital gains tax.
Fourth - A property in a discretionary trust can no longer qualify as closely inherited under the Inheritance Tax rules so the residence nil rate band will be lost - this has a potential tax cost of £140,000.
Fifth - Trustees will need to arrange landlords property insurance as standard home insurance won't work (buildings only) this is inevitably more expensive.
Sixth - Trustees can be held personally liable if the life tenant does not comply with his or her responsibilities to the detriment of the final beneficiaries.
Seventh - There will be tax charges, on entry into trust if the property is worth more that £325,000, then every ten years that the house is in a trust (up to 6% of the property value above the prevailing nil rate band) and finally when the property is sold and the trust fund distributed.
Finally - Again this was referred to in an earlier post, be careful what you wish for. The care homes that house state funded care patients are run on a shoestring. If you are seriously considering this as an option, find out where your local authority places people and pay it a visit to see if you, or more likely your parents would want to end their days there. I live in Lincolnshire and know people who have been offered a place in the north of the county when their family are based in the south meaning a round trip of 200+ miles to visit mum or dad.
I have several hundred conversations about these trust with clients each year, last year I put 4 properties into trust. It is a niche product for very specific circumstances. Don't believe the hype and the sales bluster do your research, read the guidance I linked to above.
The reason these companies who sell this type of trust can say these have never been overturned in court is because they haven't. The truth is that most disputes don't get very far as the family roll over and give in and pay the care costs, or the Local Authority rely on the Notional Capital argument - forcing the family to roll over, or in the extreme cases where families stand and fight they are adjudicated by an Ombudsman rather than a Judge.
I hope that makes it clear, there have also been some very high profile firms who have collapsed leaving lots of people high and dry. Where the had sold literally thousands of these types of trust.
Caveat Emptor.