Lifetime Trusts for Asset Protection

redbuzzard

I hope this comes under retirement planning.

An acquaintance has just been telling me about a scheme I hadn't heard of. He is considering setting up what sounds like a complicated arrangement of trusts, the intended effect of which is to protect assets before and after death.

The principal asset, the house, plus some investments, will be put immediately into trust and one effect of this will be that those assets will be excluded from means testing should he and/or his wife have to go into a care home in the future - the cost of which, for either, would be greater than their combined income as is usually the case.

That could mean that the one not in care would not lose the benefit of joint/spouse's savings, and they could pass their house and savings on to their children.

I understand that this proposition is being sold via free seminars. It is a considerable step beyond the usual trust wills/IHT reducing business, and there are significantly higher set up costs, plus I think annual fees for administering the trusts.

I'm surprised I hadn't heard of this - I would have thought that solicitors providing estate planning would be pushing this if it was robust.

Leaving aside if we can the moral arguments of trying to get the state to pay for care when there are assets to pay for it vs. stripping prudent people of their assets when their neighbours who have frittered theirs on fags and booze get everything gratis, can this be kosher?

I think this is the organisation providing the service - if you are in the office you should turn the sound down, there is a video that starts up when the page loads - and a further lengthy video presentation on the scheme.

http://www.howtokeepitinthefamily.co.uk/

I'm not seriously considering this myself, but I would like to know if it is possible to do this as suggested. TBH I was a bit sceptical.

Grateful for any illumination, or experiences.:question:

Aegis

redbuzzard wrote: »

I hope this comes under retirement planning.

An acquaintance has just been telling me about a scheme I hadn't heard of. He is considering setting up what sounds like a complicated arrangement of trusts, the intended effect of which is to protect assets before and after death.

The principal asset, the house, plus some investments, will be put immediately into trust and one effect of this will be that those assets will be excluded from means testing should he and/or his wife have to go into a care home in the future - the cost of which, for either, would be greater than their combined income as is usually the case.

If done for this purpose, it's very likely invalid for both means testing and inheritance tax planning. Deliberate deprivation of assets for manipulation of the means test can be completely unwound when the time comes, and assets placed into trust must be given irrevocable with no benefit to the settlor for it to be effective for inheritance tax planning.

I expect these are being pushed at seminars because it's easy to sell this sort of thing, and by the time you find out about it you either need a care home or are dead, so the odds of successfully complaining and getting any money back are slim.

If in doubt, your friend should definitely seek independent legal advice from a reputable private client solicitor specialising in estate planning. They shouldn't need to charge more than an hour or two to explain what options are available and what would be a bad idea.

SeniorSam

Assets cannot be put into Trust where the benefit of those assets is retained by the Settlor. THis is absolute rubbish and has either been misunderstood or a total con.

If assets such as a home are given into Trust, then a full market rent has to be paid for the gift to be outside the estate on death. If not the asset will be counted as still remaining in the estate.

Alsop, as mentioned above, if done for the purpose of avoiding care costs, it will fail.

Sam

redbuzzard

SeniorSam wrote: »

Assets cannot be put into Trust where the benefit of those assets is retained by the Settlor.

To my knowledge you can set up a "settlor interested trust". I came across that in a different context -

http://www.hmrc.gov.uk/trusts/types/settlor-interested.htm

SeniorSam wrote: »

THis is absolute rubbish and has either been misunderstood or a total con.

If assets such as a home are given into Trust, then a full market rent has to be paid for the gift to be outside the estate on death. If not the asset will be counted as still remaining in the estate.

I'm not sure what the structure is - what I gleaned is in the original post, and on the website linked in the first post. I'm pretty sure it doesn't involve paying rent though. Maybe each partner settles a trust in favour of the other?

SeniorSam wrote: »

Alsop, as mentioned above, if done for the purpose of avoiding care costs, it will fail.

That was admitted I think. It was said to depend on there being other valid reasons to set up the arrangements. I suppose it would also depend on not knowing that you were going into care when you set it up.

I think there must be some risk to this, at best, or it would be more widely known.

xylophone

http://www.clivebarwell.co.uk/trusts-to-avoid-care-home-fees/
might be worth a look.

SeniorSam

The Settlor interested Trust is, as the information says, ' from income or gains from assets held in a trust'. I was referring to the actual asset placed in Trust, which will remain part of the settlor's assets if the settlor still retains a benefit. This applies if the Truist is set up fopr the benefit of the other Spouse.

Best if you take advice from and IFA qualified in Trusts or a Solicitor who is Trust qualified.

Always be very cautious if something sounds too good to be true..... it usually is. The Tax office are aware of all schemes available, so be wary.

Sam

redbuzzard

Thanks. I'm not contemplating it for myself, I don't fancy being at the mercy of the council. I'm not entirely happy with the concept of viewing benefits as a right either, though the care home thing is a bit of a crossover with health care.

As long as the 72k cap comes in I expect we could leave our children something worth having even if we were both put away, if only because we live in an area of expensive housing.

kidmugsy

SeniorSam wrote: »

I was referring to the actual asset placed in Trust, which will remain part of the settlor's assets if the settlor still retains a benefit. This applies if the Trust is set up fopr the benefit of the other Spouse.

That's my understanding too: your Trust will be settlor-interested if you name yourself or your SPOUSE as a beneficiary. If, however, you name your WIDOW then you're OK as long as you are not a beneficiary either.

MotownFox

These Lifetime Trusts do exist and they help as follows:-

You place your house and savings into the Lifetime Discretionary Trust during your lifetime - in your name and for your benefit amongst others, such as your spouse and children.

The assets will then be looked after by professional Discretionary Trustees - normally the solicitors who help us to set up your Lifetime Discretionary Trust. The Trustees will invest the money you add to this Trust and will normally be guided by you and your chosen financial adviser.

Then you 'lock' the box and keep the key, and when you die or move into permanent care you pass the key to your loved ones who must follow the rules set out in the Lifetime Discretionary Trust Deed.

When the Lifetime Discretionary Trust ends your Discretionary Trustees will immediately pass the Discretionary Trust assets to your beneficiaries without any complicated procedures and without needing a Grant of Probate.

As to whether the Trust is guaranteed to work for care home fees? Yes - under the law as it stands they do work.
Provided you can satisfy the qualifying rules when you set up the Trust then there should be no problem. However, if the law changes you can not be given an absolute guarantee.

You are, however, always assured of all the other benefits of setting up the Trust and you could save up to ten times the cost of your Trust in Probate fees and other costs alone, depending upon the size and complexity of your estate.

It is expensive to set up these Trusts but there are no real ongoing costs.

You pay for your Trust at the beginning and there's nothing further to pay - unless you enter a care home and there's a dispute with the Council - which is very rare.

At outset you and your financial adviser will decide on the short, medium and long term investment of your Trust assets, paying particular attention to taxation and any foreseeable financial needs you may have. Careful planning will eliminate or limit any active fund management by the Trustees - and therefore avoid Trustee costs.

It does not work for IHT planning though. In deed if at the end of ten years the value of your Trust is above the then exempt amount for IHT, a small amount of IHT may be payable on the excess. This can be avoided by paying some capital out of the Trust just prior to the tenth anniversary. So it is seldom a problem.

kidmugsy

MotownFox wrote: »

there are no real ongoing costs.

That pretty much contradicts "The assets will then be looked after by professional Discretionary Trustees - normally the solicitors who help us to set up your Lifetime Discretionary Trust."

It can be expensive to use professional trustees. If you have competent friends or family to be Trustees they can hire legal and financial advisors, negotiating their fees and sacking the beggars if they are incompetent.

Benclark88

From the information I have gathered I understand that trusts protecting assets must not be a deliberate deprivation of assets. So any company/legal advisor advertising "protect your assets if your ill need care" will provide a trust that is completely useless.

I've done a bit of reading and found this article on Age UK interesting. Just type "asset protection trust" into google and it comes up


Just trying to make sure I won't get miss sold.

:beer: