Does Putting a House into a Trust Avoid Care Home Fees?

Most homeowners are concerned about the cost of aging and funding later life care. If you have worked hard to buy a property the likelihood is that you want to be able to leave your property to your children rather than see your hard-earned equity disappear in paying care home fees.

Our private client solicitors provide estate planning advice. We can advise you on your Will and answer your questions on estate planning.

For help with your Will and estate planning call us or complete our online form.

Trusts and care home fees 

Our private client solicitors come across situations where parents have spent thousands in legal fees to transfer their family home into a trust in the belief that the money spent on fees represented good value for money because the trust would protect the family home from being sold to pay care home fees and ultimately save their family hundreds of thousands of pounds. When our Will solicitors come across these situations it is frustrating. We can often spot that the money spent on putting a home into a trust was wasted and would have been better spent on a luxury cruise for the homeowners or on helping grandchildren with a deposit for their first home.

If something seems to be too good to be true it often is. You should ask yourself:

• If the trust scheme is so good why isn’t everyone doing it?
• If the trust scheme works why hasn’t the government closed the loophole? 

If your parents or grandparents mention a care home scheme it should raise a red flag and sound the warning bells. 

If you are tempted to put your family home into a trust or want to recommend a care home money-saving scheme to your parents, our private client solicitors recommend that you take advice from a qualified estate planning lawyer before you do so.   

 Using trust companies to avoid care home fees 

With many of these care home schemes, the idea is that a family home is transferred to a trust company so the homeowner is no longer the legal owner. The former owner therefore cannot sell the property to pay for their care home fees. That principle sounds fine as the homeowner is told they are legally protected by a trust deed allowing them to live in the property rent-free. The trust company is responsible for the management of the property and ultimately will hand over the property to the beneficiaries of the trust when the homeowner has passed away.

There are many problems with setting up a trust and placing a family home into it. These include:

• You are no longer the homeowner. If you need to raise equity with a lifetime mortgage you cannot do so
• The local authority may say the trust is a sham and accuse you of intentionally depriving yourself of assets to avoid payment of care home fees. The local authority can refuse to accept that the property is really outside your control and you are then at risk of an expensive and time-consuming battle with the council. When conducting means testing for care home fees the local authority could say that as you have deliberately deprived yourself of an asset the value of the family home will still be counted and you are therefore ineligible for free care home funding. Ultimately, the council could claim costs in any civil litigation if they think the trust was deliberately set up to evade care home fees and you will have spent thousands in fees in a scheme that does not work and leaves you without control of your property 
• You may have placed your property in trust as part of an inheritance tax reduction scheme and thought the scheme costs were modest compared to the amount your estate could save in IHT. However, in some cases, homeowners have gone into these trust schemes without being aware that their estate would be exempt from inheritance tax or would only have a nominal bill to pay because of the available inheritance tax exemptions 
• An unregulated and unqualified advisor recommending a trust to you may not explain the inheritance tax implications of your passing away within seven years of placing the family home into the trust

Estate planning 

When our estate planning solicitors sit down with you, we will talk with you about your assets, family, goals and priorities. We will give you clear and honest advice about why getting a management company to place the family home in trust may be a bad and expensive idea.

A trust may be a good idea for a limited number of people. However, anyone contemplating putting property in trust should take specialist advice from a qualified estate planning solicitor to ensure that you and your family fully understand the risk and come to an informed decision.

For help with your Will and estate planning call us or complete our online form.