Putting house into trust

fjh

I hope I have the 'correct' forum
A friend has created a trust and put the family house into that trust with trustee's being - him, wife and children - reason- as and when hime and wife die keeps house out of probate but also may 'protect' possible future nursing home fees.
On the face of it this seems 'reasonable ' planning.
Any thoughts as to benefits/ pitfalls?
Many thanks 

youth_leader

I'll be following your replies, my friend has also done this, her adult children still live with her.  

Bobinyorkshire

What happens if the children marry and separate. Will the house in trust be included in any divorce settlement? 

tooldle

A friends parent took this route. He is now dead. Almost two years on and the executors are still trying to deal with the trust (mess) such that the house can be sold. For this chap, it really wasn’t worth it. He hadn’t understood there would be no choice of care home and that he would be left with only £25 per week to cover his expenses, with his pensions quite rightly being used towards his care. The house continues to sap the energy of all those involved, checking it weekly, caring for the garden etc and all so that he wouldn’t have to pay for his short care home stay. 

My mum is self funding in a care home. I know which route I will chose when my time comes. 

lookstraightahead

fjh said:

I hope I have the 'correct' forum
A friend has created a trust and put the family house into that trust with trustee's being - him, wife and children - reason- as and when hime and wife die keeps house out of probate but also may 'protect' possible future nursing home fees.
On the face of it this seems 'reasonable ' planning.
Any thoughts as to benefits/ pitfalls?
Many thanks 

So many pitfalls I would get RSI listing them.

who is going to pay for the care home fees, then? 

Grumpy_chap

Does the friend and his wife have an estate that will attract IHT in any case?

I can't answer the question about putting the house in trust, except to make a presumption that it really can't be as simple and straightforward as suggested as, if it was, everyone would do it.  Then the loop-hole would be closed anyway by the Government.

Brie

It may not actually protect from care home fees even if the children are living there.  the local authority may still view this as deprivation of assets.  it's possible that the trust may be forced to sell the house even if the children are living there as young adults.  if they are older (aka over 60) then the LA may simply put a charge on the property so that when it is sold they get their cut towards the fees.  

Keep_pedalling

It is a really stupid thing to do and it won’t save on care costs as it will be treated as deliberate deprivation of assets. As it stands probate won’t be required on the first death to deal with the house but might still be required for other assets such as shares. Even if It does avoid the rather simple process of probate you replace that with the need to register the trust with HMRC and potential tax issues with CGT.

elsien

What happens if they want to downsize? 

Or need the equity from the house to live on in the future?
Or they get divorced and need to sell up? 

elsien

And from the strictly non-legal point of view;
1. On a personal level,  I have a major gripe with paying the care fees for people who have plenty of assets but have tried to stash them away so that they can’t be used. Particularly with social care in the state that it’s in at the moment and which is only going to get  worse with an aging population.

2. The marital property wouldn’t be included in the financial calculations anyway while the spouse or another family member over 60 was living there.

3. Money gives choices. Try and give your assets away and you lose those choices. If parent ever needs to go into care, then her assets and her property will be used to buy her the best possible care available. We are both agreed on that. Every time she has a holiday we joke that she is spending my inheritance. But actually an inheritance is only what is left after someone dies and there should be no expectation of anything before that.

I’ll get off my soapbox now.

Linton

Another point - if your friends impoverish themselves they may have problems should they need care at home, which is more likely that needing to go into a care home.  Council provision will be limited to a few very short visits.  If that proves insufficient moving to a care home may be necessary. Being able to pay for extra support may enable them to stay in their own home.