Living beneficiary trust

ryanmccorry86

My parents have a mortgage free PDH

They are eager to leave the property to myself and 4 siblings when they pass.

Is putting the property in a trust a legitimate method of (i) avoiding inheritance tax & (ii) protecting the property from a nursing home were they to one day enter care (we would avoid this by all means but just examining options/making sure they're protected as much as possible)

Im not interested in doing anything that could be considered illegal but have heard many rich people do this with assets - PDH is worth max £150k, so not a huge asset base 

Many thanks

Albermarle

(ii) protecting the property from a nursing home were they to one day enter care 

The local authority would see this as deliberate deprivation of assets and ignore the fact it was in a trust.

In any case presume you would want your parents to have the best care they could afford anyway, and not rely on council funding. In reality the number of people who actually lose their homes is quite small anyway.

Are you sure they would be liable for IHT ? A couple together and a family home left to their children would have to be worth over a Million Pounds to pay IHT.

Malthusian

Albermarle said:

Are you sure they would be liable for IHT ? A couple together and a family home left to their children would have to be worth over a Million Pounds to pay IHT.

Or £650,000 + the value of the home on the second death if lower, to be pedantic. (The home is only worth £150k, so if they both went under a bus today, the maximum they can leave IHT-free to descendants is two standard nil rate bands of 2x £325k, plus the £150k home = £800k.) 
But it sounds like it matters little unless the parents have very substantial assets outside the home. 

lindabea

Malthusian said:

Albermarle said:

Are you sure they would be liable for IHT ? A couple together and a family home left to their children would have to be worth over a Million Pounds to pay IHT.

Or £650,000 + the value of the home on the second death if lower, to be pedantic. (The home is only worth £150k, so if they both went under a bus today, the maximum they can leave IHT-free to descendants is two standard nil rate bands of 2x £325k, plus the £150k home = £800k.) 
But it sounds like it matters little unless the parents have very substantial assets outside the home. 

Are you sure your comment is correct?? Why do you think it's £800K.

The RNRB is £175000 (not £150K) and it is per person. So a married couple have 2X325000 + 2X175000 which is a total of 1 million that can be offset against IHT.  

eskbanker

lindabea said:

Malthusian said:

Albermarle said:

Are you sure they would be liable for IHT ? A couple together and a family home left to their children would have to be worth over a Million Pounds to pay IHT.

Or £650,000 + the value of the home on the second death if lower, to be pedantic. (The home is only worth £150k, so if they both went under a bus today, the maximum they can leave IHT-free to descendants is two standard nil rate bands of 2x £325k, plus the £150k home = £800k.) 
But it sounds like it matters little unless the parents have very substantial assets outside the home. 

Are you sure your comment is correct?? Why do you think it's £800K.

The RNRB is £175000 (not £150K) and it is per person. So a married couple have 2X325000 + 2X175000 which is a total of 1 million that can be offset against IHT.  

That post was in the context of how much this particular couple (OP's parents, with a home worth £150K) could leave to others without IHT coming into play, rather than a generic example about the hypothetical maximum.