Are Life Time Trusts worth it? 21 November 2022 at 5:02PM in Savings & investments 21 replies 918 views

SLP37

We met with a will writer last week who has suggested we should consider taking out a lifetime trust/estate protection trust. I’ve been researching this over the weekend and I’m more confused than ever before! Does anyone have any experience of these and could advise whether they are beneficial or not and why?  It’s going to cost £3,000 to set it up.  I’ve checked the company out and they are reputable. 

dunstonh

The vast majority of people do not need these.   However, in a niche number of cases, it can be suitable if your objectives make it sensible.

Most will writers have no qualifications, and their primary objective is to charge massive amounts to put in place things that you do not need.

What objectives did the will writer tell you would be met by setting this up?

Malthusian

SLP37 said: I’ve checked the company out and they are reputable. 

There are no reputable will writers. Reputable people who write wills are called "solicitors" and have Solicitors Regulation Authority numbers.
Will writer is to solicitor what "alternative medicine practitioner" is to doctor. 

SLP37

We rent our previous homes out and now live together in a jointly owned property.  All 3 homes together are worth just over a million pounds.  So it was around protecting family from inheritance tax when we die and avoiding care fees.  In my own research I’ve read that councils often see trusts as a deprivation of assets to avoid fees therefore any assets in a trust are taken into account. 

Jami74

SLP37 said:

avoiding care fees. 

Personally, if I ever need to be in a care home I'd opt for the best I could afford. While I'm sure your offspring would appreciate a big inheritance I'm sure they'd rather know you lived your last year or so of life in the best comfort possible.

(Not dissing council paid care, btw. As long as you're not fussy.)

Keep_pedalling

SLP37 said:

We rent our previous homes out and now live together in a jointly owned property.  All 3 homes together are worth just over a million pounds.  So it was around protecting family from inheritance tax when we die and avoiding care fees.  In my own research I’ve read that councils often see trusts as a deprivation of assets to avoid fees therefore any assets in a trust are taken into account. 

Frankly with those sort of assets you would be utterly stupid to attempt to put yourself in a position where you rely on a LA for your care. Not something I am prepared to do, the thought of ending up in over my dead body grange would be my worse nightmare.

As for IHT you should not be taking tax advice from a will writer who is utterly unqualified to provide such advice, and is very difficult to see how this would actually work, and may end up costing you more tax. There are better ways of reducing your IHT liability although if all your wealth is tied up in property it is not so easy.

bostonerimus

I have a rental property and a large estate and I advise you to do what I did when thinking about wills etc. Go to a local solicitor that specializes in estate planning. It will be money well spent. My lawyer understood my situation quickly, answered all my questions and came up with a fairly simple solution. Don't listen to anyone promising to help you avoid inheritance tax. Walk away from this "will maker" right now.

SLP37

I don’t know how to amend the original post but wanted to add this:

The will writer works for a company who specialise in a range of legal services including Wills, Lasting Powers of Attorney, Probate and Trusts, as well as advice on care fees and estate planning.

Keep_pedalling

SLP37 said:

I don’t know how to amend the original post but wanted to add this:

The will writer works for a company who specialise in a range of legal services including Wills, Lasting Powers of Attorney, Probate and Trusts, as well as advice on care fees and estate planning.

Sorry, but the advice they have given you, based on what you have told us, is terrible. No one with over £1M in assets should be being advised how to dodge self funded care costs and I can’t see how placing your property is going be tax efficient.

Transferring your properties into a interest in possession trust (which is what it seems you are being asked to do) is going to be subject to immediate taxation because it will be treated as a chargeable transfer for IHT purposes, and your rental properties will be liable to CGT on the transfer. 

Unless you are also going to be paying the trust full market rent for your home it will never drop out of your estate because it is a gift with reservation of benefit and putting it in trust will lose your estates residential NRB.

Who are this company regulated by? If you went to a suitable qualified and regulated STEP solicitor or IFA for IHT planning advice they would provide you with impartial advice on on what the best solution for you and you would charged for that advice even if the end result was to do nothing. Will writing companies don’t do this you don’t pay them for advice you pay them to carry out a service such as writing a will, making LPAs or setting up a trust and all of these things can be done by unregulated people how you have no comeback on if things go horrible wrong.

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SLP37

Thank you all for your advice.   I agree we need to consult a specialist in this area.

Malthusian

SLP37 said:

The will writer works for a company who specialise in a range of legal services including Wills, Lasting Powers of Attorney, Probate and Trusts, as well as advice on care fees and estate planning.

Do they also do window cleaning and children's parties?
When you look up the directors of will writing firms on Companies House they tend to have a rich and varied background.