Worried for parents about asset protection trust

Sagwala

In brief, my parents have had a will consultation today expecting to pay £180 to get a will down in writing.

As a brief background, if both my parents were to shuffle off tomorrow we are taking property circa 300k, money and assets circa 200k max 500k - all of this would be a straight down the middle split with my sister. 

I have just visited to find out they have paid £4500 for the company to set up a trust between the 4 of us which protects all of the above from being touched by care costs in the future, and also to prevent losing the bloodline inheritance in the event of a divorce. Also to setup Power of Attorney in the event of them losing capacity. 

I have to stay I am totally ignorant to any information with regard to the ins and outs of the above and really concerned about a)the cost of the service b) the legality and c) the water tightness of such a product.

I would really really be grateful of your constructive critical input.

Thankyou in advance 

retiringtoosoon

What a waste of money

phillw

Sagwala said:

I have just visited to find out they have paid £4500 for the company to set up a trust between the 4 of us which protects all of the above from being touched by care costs in the future,

I'd ask them to put this in writing so that you can show it to the local council to make sure it's legal & whether they will refund the money if it's not.

Did anyone ask them whether they would be happy with council funded care?

Keep_pedalling

If we are talking about life interest trusts being put in place on the first death then that is a quite common and reasonable approach to protect an inheritance from second marriages and at the same time provide security to the survivor, but the price being charged for such a service is a rip off.

If the proposal is to put everything thing in trust now you should put a stop tho that before the trust documents are signed. Deliberate deprivation of assets come into play for such care cost avoidance schemes so they will be just chucking their money away. I would also ask them if they are happy to risk ending up in over my dead body grange just so they can leave more money when they are dead.

I presume this was a home visit from a will writing company sales person rather than a local solicitor?

P1Fanatic

I had a similar thing although nothing near the fees you are talking about (at least upfront). First thing I heard was my dad was having a pension discussion to renew his very old will with someone recommended by a friend (lives in managed flats) next thing he had paid a £250 deposit (luckily on credit card) and had paperwork talking about optional trusts, ringfencing etc. I got a bit worried and stared researching and could not find much on this person and their website was rather amateur. So I got him to change his mind and request a refund which to be fair was given no bother. He is now using a local solicitor which I am much more comfortable with.

nyermen

Agree with others - the arrangements in general are okay (assuming theyre done correctly), but dont trust things now.

But the cost?  Wow.  I paid £1000 for trusts & mirror wills for me and my wife, including care provisions for our son, and another £500 I think, for the LPA's (they're more fuss for the solicitor than they seem when you just fill in the forms).  
Which I think is roughly the same scope?

jimjames

Sagwala said:

I have just visited to find out they have paid £4500 for the company to set up a trust between the 4 of us which protects all of the above from being touched by care costs in the future, and also to prevent losing the bloodline inheritance in the event of a divorce. Also to setup Power of Attorney in the event of them losing capacity. 

Based on the amount quoted that sounds excessively high and rings warning bells that it might not be in their interests. There was a company doing similar some years ago claiming to avoid paying care fees and people that signed up had huge problems later on in particular with trustees. 

For the trust being setup for your parents, who are the trustees of it?

https://www.coles-miller.co.uk/news/blog/beware-of-so-called-asset-protection-trusts-wpb.html
https://www.ramsdens.co.uk/blog/worthless-piece-paper-think-twice-creating-asset-protection-trust

Malthusian

I have just visited to find out they have paid £4500 for the company to set up a trust between the 4 of us which protects all of the above from being touched by care costs in the future

As others have said, this won't work (it is blatant deliberate deprivation) and having yourself chucked into Overmydeadbody Grove at the taxpayers' expense so you can leave more money to your children (or, in this case, not to your children but for the eventual benefit of unknown distant descendants - see below) would be a daft idea even if it did.

and also to prevent losing the bloodline inheritance in the event of a divorce

The only way you can stop inherited money from being considered assets of your children's marriages in the long run is not to leave them any. (It is not guaranteed that an inheritance would be split with the ex-child-in-law on divorce - it depends on the needs of both spouses and whether the inheritance has become intermingled with the marriage assets.) 

These schemes typically achieve that by letting the children have loans from the trust, which in the event of divorce are repaid, presumably to eventually be loaned to some other "bloodline" descendant or your newly single self. The beneficiary has access to the money but does not actually have the money. When totting up assets on divorce they have inherited nothing. (They get X in cash and owe X back to the trust, which nets out at nil.)

But the vast majority of parents want to leave children assets, not liabilities. So did your parents until they met whoever this was (you say their Will was a straightforward split down the middle on the second death). Why did they change their mind?

This kind of trust is also very expensive both in terms of fees and punitive ongoing tax bills.

nyermen said:
But the cost?  Wow.  I paid £1000 for trusts & mirror wills for me and my wife, including care provisions for our son, and another £500 I think, for the LPA's (they're more fuss for the solicitor than they seem when you just fill in the forms).  
Which I think is roughly the same scope?

The cost of the Wills sounds fine (given that special provision needed to be made for your son). But Lasting Powers of Attorney cost £82 each to DIY and are very straightforward. They probably are more fuss for the solicitor than you would think (making a bowl of cereal is more fuss than you would think if you are doing it for someone else), but they are usually no fuss at all to DIY. Fill in names and addresses, have everyone's signatures dated the same, joint and several, don't include silly instructions. 

TiVo_Lad

You haven't mentioned what part of the country your parents are located as obviously there are differences to the legal systems. BUT, an LPA can be done in England and Wales online for £82 (£164 if you want both Financial plus Health and Welfare), so both parents would cost £328. A simple English Law Will wouldbe maybe £150 (perhaps £300ish for both parents), so £650 should cover it. You have to wonder what the other £3,850 is for. If they have simple affairs and this company does this all the time, it does sound like a massive rip off.

As others have said, deprevation of assets for the sole purpose of avoiding future care costs is a waste of time since the local authority (assuming England) will just ignore it.

Albermarle

Lasting Power of Attorney is a separate issue from wills, trusts, dodgy schemes etc .

It is recommended that they are in put in place as you get older, in case ( the parent (s) in this case ) lose mental capacity.
They can do one for each other, and you or your sister can be named as a back up. Or they could each appoint one of you directly.
There are two types - Financial + Health & Welfare. So there will be four in total . 
You can do them yourself on line @ £82 each, although you still have to print them off and get them signed.  It is a bit of a faff, as you have to get a lot of different signatures, but having LPA's in place can save a LOT of problems farther down the line.
Make, register or end a lasting power of attorney: Make a lasting power of attorney - GOV.UK (www.gov.uk)
You do not need a solicitor to do them, if you do not want as it will be more expensive. Caveat is unless you live in Scotland.

Otherwise the fear of older people losing all their assets/home to care fees, is partly caused by scaremongering in the media. Although it does happen, it is not very common in reality.

Sagwala

Keep_pedalling said:

If we are talking about life interest trusts being put in place on the first death then that is a quite common and reasonable approach to protect an inheritance from second marriages and at the same time provide security to the survivor, but the price being charged for such a service is a rip off.

If the proposal is to put everything thing in trust now you should put a stop tho that before the trust documents are signed. Deliberate deprivation of assets come into play for such care cost avoidance schemes so they will be just chucking their money away. I would also ask them if they are happy to risk ending up in over my dead body grange just so they can leave more money when they are dead.

I presume this was a home visit from a will writing company sales person rather than a local solicitor?

It was a home visit yes from a local will writing company. Is there any way of getting their money back.