Don't trust trusts!
You may be tempted to put your house into a protection scheme, but don’t, says Paul Lewis.
Radio Times reader Peter did exactly the right thing. Tempted by schemes he had seen to put his house into a trust “to protect it and other assets from being taken to pay care fees”, he asked his financial adviser – who said don’t!
The adviser was also right. Such schemes do not work, cost you a lot of money – typically several thousand pounds – and when you do finally pop off, they leave your heirs with problems and further costs.
I will put the practical case against them first. You have worked hard to buy your home and it is a valuable asset. But what is that money for if not to keep you in old age? Then, if there is any left, leave that to your children or others. Paying for your own care also puts you in control, giving you choice and better conditions than if you left it to the local council to find you a place it was willing to pay for.
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The legal case against these kinds of trust is that putting your home into one does not work. If you need to go into a care or nursing home, the local council looks at your assets. But if you disposed of any to boost your entitlement, the council can count that asset as if you still owned it. It is called deliberate deprivation, and putting the house into a trust would be a clear example of doing that. Remember, too, that the value of your home is only counted if it is not occupied by a spouse, partner or a relative aged 60 or more.
Trusts do not work to protect your property from Inheritance Tax either, but for more complicated and different reasons. You need many millions for it even to be considered a good idea.
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One more argument against: once the house is in trust, you no longer own it. On your death your heirs must first find the trustees – which can be difficult – and when they do, my experience is that trustees are often reluctant to help without being paid yet more hefty fees.
So don’t trust trusts. Use your assets to give yourself the best remaining life you can.