Wills Trust Funds IHT question

Yorkshireman99

krysiatennis wrote: »

Both parents have LPA they did this about 5 years ago before mum was diagnosed. Not sure how this helps. As soon as a person dies the LPA becomes void. I currentl have POA for my mother under terms of the LPA

To clear up confusion. I am not trying to deprive my parents of any of their funds towards their care. But they can be directed more beneficially Inwoukd like to know. If dad dies first once mums savings drop below the threshold for care funding we would of course like her to be entitled to this we would then be more than happy to top up using money in trust from dads house.

The POAs don't help nmuch in this situation since they cannot be used other than to benefit the domore. Transferring funds to a trust would not be directly beneficial and in any case could be seen as deprivation of assets.

securityguy

"My father feels that if he leaves everything to my mother it could all be called upon in means assessment for care but if he leaves in trust only her savings will be taken into account" - suggests intention or at least hope of dodging care fees to me.

Indeed. The whole purpose of the project appears to a plan to both retain access to the funds and qualify for means-tested benefits: it's benefit maximisation, even if it isn't actually fraudulent. The intent is that there is a sum of money for the use of someone's care, but that can be disregarded for the purposes of claiming benefit for that care.

If this were done by an individual with their own assets, it would be straightforwardly deprivation of assets and would be ignored by a decision maker, who would work as though the capital were controlled by the claimant. Doing it as part of a will, with the claim that the assets transferred into the trust were never the survivor's in the first place, might take it into the realm of legality (although as I outline above, a sufficiently aggressive council might fancy the fight). But no-one should be in any doubt that the only intent is to be able to claim benefits that would otherwise be unavailable.

I do often find that people look at these schemes without realising the attendance allowance is not means tested.

Keep_pedalling

"My father feels that if he leaves everything to my mother it could all be called upon in means assessment for care but if he leaves in trust only her savings will be taken into account" - suggests intention or at least hope of dodging care fees to me"

Sorry, I managed to miss that line which seems to conflict with the preceding text.

troubleinparadise

Should he change his will to leave his assets including house to trustees in a trustfund which stipulates this trust fund should be to
look after my mother should he die first and then anything left
comes to us on her death.

Surely that is virtually no different to leaving his will as it is whereby Mother inherits everything anyway, which would then fund her care via Attorneys, and anything left after her death goes to the children (assuming the mirror wills specify that in the case of the death of the spouse)?

The only difference I can see is that it would cost more to set up and administer; unless a trust fund in which she is the only beneficiary is not included in a financial assessment by a Local Authority? I'm sure someone on the forum can explain that to me.

securityguy

"The only difference I can see is that it would cost more to set up and administer; unless a trust fund in which she is the only beneficiary is not included in a financial assessment by a Local Authority?"

I think the hope of those intending to get more benefits via this device would be that the trust would be assessed as an income, not as a capital sum. But if the trust is discretionary, one of the options open to the trustees is to hand over the whole sum. And if the trust is not discretionary, one of the options open to the beneficiary is to demand the whole sum. The only sure way to find out if this will work is to try it.

One of the things I have found very interesting in reading not only sensible places, like MSE, but also various commentators on FMOTL lunatic fringe (I recommend quatloos.com), is that "trusts" acquire a talismanic status amongst people who are not, in general, financially sophisticated. A lot of money and effort is expended on the setting up of trusts for all sorts of purposes, and these trusts avoid IHT, avoid care home fees, avoid the loss of benefits, prevent children from spending money too soon and, for all I know, cure acne and fix dry rot. People who would probably struggle to distinguish between a standing order and a direct debit pay large amounts of money to shadowy "advisors" to set up complex networks of trusts to "protect" their money. But who benefits?

It's clear that the people who charge money to advise on, and set up, trusts, benefit from them. But these are not magic bullets, solving all your financial problems at the stroke of a pen (if I may mix my metaphors), and leaving aside issues - which we have seen on MSE - of trustees misbehaving by accident or design, trusts are not the impermeable shields of a Liechtenstinian Anstaldt, proof against courts, governments and the Bavarian Illuminati. There are many ways in which trusts which appear, thanks to complex documents, some of them with signatures and seals and everything, to be separate from their beneficiaries can actually be judged to be just parts of the beneficiaries' assets.

A genuinely arms' length "blind" trust is a hard thing to set up, and even harder to convince a hungry tax man or DSS decision maker as actually arms' length. If a trust appears to be under the direct or indirect control of its beneficiaries, and has no reason to exist other than to frustrate the state in collecting tax or assessing benefits, courts are perfectly happy to wind the trust up, return its assets to the beneficiaries and let the cards then fall where they may. Trusts were a huge feature in the affairs of landed gentry in the 19th century but the past is another country. These days, I have a horrible suspicion that they have faith placed in them which is not necessarily justified.

Mojisola

krysiatennis wrote: »

Our main priority is to set things up so both are looked after should they need to go into care.

My father feels that if he leaves everything to my mother it could all be called upon in means assessment for care

It's too late in your situation but an often-used way of passing some of the money down to the children is for the parents to own the house as 'tenants in common' - a 50/50 split.

Each parent then leaves their half of the house to the children but gives the spouse a life interest so that they can live in the house or sell it and use the money to buy another property, etc.

That means that half of the value of the property can be used if the surviving spouse needs to pay for residential care while the other half goes to the children.