A Question of Trust
Be very careful about trusts that claim to help avoid care-home fees, says Paul Lewis
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Two firms that charged people to put their homes or savings into a trust to avoid Inheritance Tax and care-home fees have collapsed – leaving thousands of customers with high costs and great uncertainty.
Schemes of this sort charge hefty fees to set up a trust into which homeowners transfer their home or savings. The customers retain the right to live in their home and are promised that when they die the trust will release the home and the savings to their heirs. The schemes say the trust keeps their home and savings outside their estate for Inheritance Tax purposes, and invisible to local authority means tests for care-home fees. However, these schemes do not always work as promised and the collapse of two firms dealing in them should be a warning to anyone considering such an arrangement.
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Scottish law firm McClure Solicitors went into administration in 2021 after charging UK customers several thousand pounds to set up a total of 18,840 Family Protection Trusts. Many of these customers or their heirs have had to pay large fees to get their homes out of the trust. MSPs have called for an inquiry, and the McClure Action Group has raised complaints with the Scottish Legal Complaints Commission and met with Police Scotland (no criminal charges have been brought and the former MD of McClure strongly disputes any claims of criminality or fraud). Any client of McClure for wills, power of attorneys or trusts should contact solicitors Jones Whyte, which has taken over this part of McClure’s business (joneswhyte.co.uk).
The Family Trust Corporation sold a trust scheme from 2005 until it collapsed in 2018. It was taken over by Philips Trust Corporation, which went bust in 2022, leaving many without the money they had passed to it to put into a trust. Schemes were often taken out as a result of referrals from building societies, some on their premises, and the societies earned commission from sales. Three societies – Leeds, Newcastle and Nottingham – say there is no obligation on them to pay compensation but have agreed nevertheless to pay up to £44 million to 2,000 customers. I understand seven smaller building societies have yet to make any similar offer.
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Trusts can work for very wealthy people. But if your main asset is your home and you have savings even in six figures they are generally a waste of money. The Society of Trust and Estate Practitioners (STEP) is a trustworthy organisation who can advise (step.org).