HELP PLEASE!!!! - Parents property being transferred into Trust - GOOD IDEA???

Emma52

Hello,

My parents are fit and health and are in the process of transferring their property into a Trust for me in order to exclude the property from Inhertitance Tax and to avoid potential social care costs.

The Trust is being written by a company that advertises their services and gives out leaflets in department stores.

The company is not Law Society or SRA registered, and have already requested substantial costs upfront.

Should I be concerned? I personally have no knowledge of property Trusts - PLEASE HELP, thank you.

Yorkshireman99

These schemes don't work! They are a scam. Telll your parents they are about to be ripped off big time.

securityguy

You will get two basic types of advice. Some people will claim these trusts are watertight and the companies as honest as the day is long. Some people will point out that the watertightness of these trusts have yet to be tested in courts and that the companies selling them appear in many cases to have zips up the back of their jackets to let their fins out.

If your parents retain the right to live in their property without paying market rent, then the gift into the trust is a gift with reservation and therefore the IHT-avoiding powers that are claimed are not necessarily true. The transfer may or may not be effective as a hedge against social care costs depending on whether the local authority believe that the trust is really independent of your parents. As the local authority can always refuse to pay and the onus is then on the claimant to convince the LA that the transaction was legitimate, the LA hold most of the cards in these arguments.

Emma52

Hello,

Thank you for your replies so far.

I have a few questions that I am worried about.......

The company involved doesn't seem to have any inhouse solicitors and are paralegals.
Will the company become the Trustee? and if so, does this mean my parents will not solely own their property?
The company is a Ltd company and can close tomorrow!!!
Is it normal for the company to issue a 14 day cancellation period before the final Trust has been written.

Julio7

Absolutely Dont go this route ... seek advice from an official solicitor instead. This is a minefield and it will depend on what type of care your parents might require at a later date if funded also it depends which area of the Uk you live in too. Look at Saga web site for info too.

Keep_pedalling

You are right to be concerned, and the only thing you should be considering now is to try your hardest to stop them doing this foolish thing. Unless they are also prepared to pay full market rent into the trust then it won't work for tax avoidance, and the avoidance of care fees is also likely to fail because if the scheme does not save IHT then avoidance of care fees is the only logical reason for doing it so deliberate depreciation of assets comes into play.

Anyway the wonderful thing about having substantial assets in your old age is that you will not have to jump through loads of hoops just to get the most basic care available, you will have free choice instead.

Once the primary residential nil rate band has full kicked in your parents will be able to leave up to a £1M estate tax free, and sticking the home into a trust may well lose that allowance reducing that by £350,000.

If their estate is over £1M there are other things they can do to reduce their potential IHT burden, but then again if they are in that position they can afford very good care and still leave a substantial sum.

securityguy

"avoidance of care fees is the only logical reason for doing it so deliberate depreciation of assets comes into play."

Strictly, one of the requirements for a transaction to be adjudged as deprivation of assets is that at the time the transaction took place, care fees were obviously imminent. So in principle, a couple both in good health cannot do anything which is DoA, because there is every chance they will die without requiring care. However, the onus would be on the claimant to prove that was the case, as the LA can just say "no, we aren't paying, see you in court". So personally, I wouldn't rely on the mere fact that at the time I did something that has the whiff of DoA I wasn't obviously heading towards needing care.

Over the coming years, LAs are I suspect going to argue that if it walks like DoA and quacks like DoA, it is DoA, unless you can prove otherwise. And waving around a trust document written by shysters isn't going to terribly convincing: LAs have enough skin in the the game to justify _serious_ legal artillery to discourage "clever" scheme.

Yorkshireman99

Just curious as to why you think the default is that the any disposal of assets is deprivation of assets? When I discussed this four years ago with my solicitor they were quite adamant that unless there was prooof of the need for care within two to three years then the LA claim would fail. Recently my IFA, a long established firm with a serious client base, confirmed this. I agree that a document produced by a systers is not going to carry much weight for few years but beyond that it would be for the lA to prove their case not the other way round.

SevenOfNine

Emma52 wrote: »

Hello,

My parents are fit and health and are in the process of transferring their property into a Trust for me in order to exclude the property from Inhertitance Tax and to avoid potential social care costs.

The Trust is being written by a company that advertises their services and gives out leaflets in department stores.

The company is not Law Society or SRA registered, and have already requested substantial costs upfront.

Should I be concerned? I personally have no knowledge of property Trusts - PLEASE HELP, thank you.

Absolutely NOT to putting the property into a trust, NO. But certainly NOT for the reasons given by securityguy.

You must research the new'ish Main Residence Nil Rate Band relating to passing on the family home.

https://www.gov.uk/guidance/inheritance-tax-residence-nil-rate-band#inh-home

To qualify for this the property must be left to direct descendants, this is unlikely to include 'via a Trust', even if it is direct descendants who will benefit from said Trust!

The best place for your parents to get appropriate advice is to employ a STEP member solicitor, who can interpret tax & estate planning law accurately.

This is in a different league to that of well read members on a forum, whose qualifications could be in plumbing for all you know, & certainly NOT a company requiring up front payment & handing out leaflets in a store.

securityguy

Yorkshireman99 wrote: »

Just curious as to why you think the default is that the any disposal of assets is deprivation of assets? When I discussed this four years ago with my solicitor they were quite adamant that unless there was prooof of the need for care within two to three years then the LA claim would fail. Recently my IFA, a long established firm with a serious client base, confirmed this. I agree that a document produced by a systers is not going to carry much weight for few years but beyond that it would be for the lA to prove their case not the other way roound.

If the LA simply refuse to pay, then the only route to resolve the dispute is for the claimant to challenge the LA, not vice versa. In reality, the balance of power always sits with the side which has the option to do nothing. If a decision taker says "DoA", then it's for you to go to higher tribunals and make your case; they can just do nothing and win.

Keep_pedalling

Yorkshireman99 wrote: »

Just curious as to why you think the default is that the any disposal of assets is deprivation of assets? When I discussed this four years ago with my solicitor they were quite adamant that unless there was prooof of the need for care within two to three years then the LA claim would fail. Recently my IFA, a long established firm with a serious client base, confirmed this. I agree that a document produced by a systers is not going to carry much weight for few years but beyond that it would be for the lA to prove their case not the other way roound.

Yes the LA need to prove DoA, but in this case I would have thought all the proof they need is the lack of any other reason anyone would do this.