Using Trusts to Pay For Care Home Fees - a good idea?
Over the years, we have seen an increase in the public awareness of the cost of care and increasing inheritance tax bills. Unfortunately this increased knowledge leads to increased fear, and we often see people taking steps to try and make things easier for their loved ones in the event that they lose capacity or leave an inheritance tax bill behind, often at a great expense.
“Family Protection Trusts” are typically advertised as a way of avoiding inheritance tax and/or care fees, depending on the circumstances in which they are set up (and the timing). This type of trust is usually called a “discretionary trust” meaning that the Trustees who manage the trust have wide powers to decide who should benefit from the assets held in the trust (whether that’s property, cash, or something else).
Unfortunately these trusts are not always suitable, and advice is needed from an experienced practitioner to be able to advise on the pros and cons, and come to a conclusion about whether or not this type of trust is suitable for a particular person.
When is a Family Protection Trust suitable?
At Lawson-West we generally advise against this type of trust, except in very limited circumstances.
Most people can pass on £325,000 to their loved ones when they pass away. In some cases this goes up to £500,000, meaning that a couple could leave up to £1m to their children/grandchildren when they die. In our experience, this means that the majority of people living in Leicestershire will never pay inheritance tax.
Local authorities know that people want to avoid paying care fees and so they can simply ignore any gifts or transfers into trust where the sole or main purpose was to avoid having to pay for care. This means that trusts, or outright gifts, often do not help a person to avoid having to pay for their care (if required).
Also by placing your property into a trust, you are giving up the right to do what you like with it. Think of it as a gift, but it’s a gift to a trust instead of a gift to another person – if you make a gift then you no longer have control over what the recipient does with it. That means that in the worst case scenario, you could be prevented from making adaptations, doing large repair work, or you could even be forced out of the property.
How can Lawson-West Solicitors help?
Sophie Forsyth, TEP, Associate Solicitor
Lawson-West Solicitors, Leicester
Our team has over 80 years of experience combined and includes two full members of the Society of Trust and Estate Practitioners (STEP). That means you are in safe hands when discussing your matter with us, whether trust-related or otherwise.
We would be happy to have a chat with you about your circumstances and whether this type of trust might be suitable for you. You can give our friendly team a call on 0116 212 1000 or 01858 445 480 or you can Contact Us and leave a message for us to contact you in confidence.
Please note that we can only offer advice regarding English trusts, not those set up in Scotland.
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