Can you put a house in a Trust if you haven't paid the M'gage off?

bob_dob

Hi,
My parents are thinking of putting their house in a trust for their three sons but believe that they can not do this until they have paid off their mortage (less than a year to go). Please can someone tell me if this is correct?
Thank you.

bob_dob

Hi,
Please can anyone help me with this?

kingstreet

Sounds about right to me. They want to gift it to a third party. It's just the same as transferring it to the three of you directly. The lender would need the new owners to become a party to the mortgage and is unlikely to accept a trust.

Presumably this is some kind of family estate plan? Future care fee and IHT avoidance? If so, can you tell me if they are paying more than £1,500 for the wills/trusts and change to tenants in common to do it?

Thanks

bob_dob

Thank you for that.
Well that advice they received was free but being as they have not yet paid off the mortgage they have not taken the next step. This is to say that they have no idea how much they will/might pay.

I take it £15,000 is the expected cost then?

I wish there was some sort of 'standard' fact sheet of pros and cons of a proposed trust.

Thrugelmir

bob_dob wrote: »

I wish there was some sort of 'standard' fact sheet of pros and cons of a proposed trust.

There's not a one size fits all answer. Speak to experts in the field. So that the solution is tailored to the requirements.

holly_hobby

Nope a mortgaged property can not be placed into trust - this is because the trust becomes the legal owner of the asset.

If they rented it out they could have the rental income paid into a trust.

Hope this helps

Holly

kingstreet

bob_dob wrote: »

Thank you for that.
Well that advice they received was free but being as they have not yet paid off the mortgage they have not taken the next step. This is to say that they have no idea how much they will/might pay.

I take it £15,000 is the expected cost then?

I wish there was some sort of 'standard' fact sheet of pros and cons of a proposed trust.

£1,500, not £15,000.

I've heard of firms charging over £2,500 but wanted to see your experience if you were considering it. Consensus seems to be they are stuck until the mortgage is repaid next year.

Is one of them likely to need care in the "foreseeable" future? Hence the need for some urgency?

We have a firm we introduce to and I've not used them yet. It's actually a bit more involved. The property has to be changed to tenants in common if it's a joint tenancy. Then each partner has to make a will and there's a trust for each of them.

Basically, the trusts protect the estate against;-

care fees
inheritance tax
creditors
remarriage of donor's spouse
claims by former partners of beneficiaries.

The latter two prevent a new family from supplanting the earlier children and the children splitting from their partners and the partners attempting to claim on the former in-laws' estate.