What is the latest state of play on Care Home planning etc?

doodling

Hi,

There seems to be a lot of confusion on this thread.

Immediate post death interest trusts created by will were, are, and are highly likely to remain, a perfectly valid and sensible inheritance planning technique.

Other approaches to placing property into trust, usually whilst the (now ex-)owners are still alive continue to present all kinds of risks and costs and continue to be a valid target for authorities wishing to fund care costs (and general taxation come to that).

Nothing has really changed. 

Spivved1987

doodling said:

Hi,

There seems to be a lot of confusion on this thread.

Immediate post death interest trusts created by will were, are, and are highly likely to remain, a perfectly valid and sensible inheritance planning technique.

Other approaches to placing property into trust, usually whilst the (now ex-)owners are still alive continue to present all kinds of risks and costs and continue to be a valid target for authorities wishing to fund care costs (and general taxation come to that).

Nothing has really changed. 

This comes back to my original question as to whether this has been tested yet in the courts. You are implying that placing your house in a Trust while you are alive seems likely to fall foul of DDoA rules, whereas willing it in Trust will not. If that is definitely the case, then I will sleep more soundly. But is there an equivalent case to The Coughlan Judgment in this area? Have any local authorities attempted to have a post-death Trust set aside?

Keep_pedalling

As per my earlier reply, leaving your half of the house to your children with a life interest to your spouse, is not and never has been deliberate deprivation of assets. 

It also protects the children’s inheritance from a second marriage and avoids a CGT liability on the second death. 

I can’t see why you would need to change your will unless there are other reasons to do so such as changing your executors. 

doodling

Hi,

Spivved1987 said:

doodling said:

Hi,

There seems to be a lot of confusion on this thread.

Immediate post death interest trusts created by will were, are, and are highly likely to remain, a perfectly valid and sensible inheritance planning technique.

Other approaches to placing property into trust, usually whilst the (now ex-)owners are still alive continue to present all kinds of risks and costs and continue to be a valid target for authorities wishing to fund care costs (and general taxation come to that).

Nothing has really changed. 

This comes back to my original question as to whether this has been tested yet in the courts. You are implying that placing your house in a Trust while you are alive seems likely to fall foul of DDoA rules, whereas willing it in Trust will not. If that is definitely the case, then I will sleep more soundly. But is there an equivalent case to The Coughlan Judgment in this area? Have any local authorities attempted to have a post-death Trust set aside?

IPDI (i.e. Will) trusts are generally used when there is a surviving spouse who continues to live in their jointly owned (tenants in common) house.  So we are talking about the situation where someone has received care and then died, leaving their spouse living in their house.

Note that holding your house as tenants in common (assuming a near 50/50 split) with your spouse is not deprivation of assets, merely making explicit what the law already considers implicit in a marriage.  I very much doubt that a government would be so foolish as to make it financially advantageous to divorce if one party needed care - that way lies massively increased care costs as older people might decide that they would be better off without their ailing partners rather than caring for them.

The current regulations made under the Care Act include a disregard for any jointly owned property which is occupied by a spouse (and was so occupied when their partner went into care).  The disregard is such that so far as the LA is concerned, that property doesn't exist and they must fund the care (assuming that there are no other assets).  (I leave it to you to consider whether having your care provided at the mercy of the LA is a good idea).

Given that position, I can't see how the IPDI trust would be open to legal challenge.

If you wanted me to try and predict a worst case scenario, one might imagine that at some point that the spouse occupation property disregard might be abolished.  That wouldn't have any impact on the IPDI trust as it could only cover any assets owned by the deceased at the time they passed away, but it might reduce or eliminate the value that would be placed in that trust.  I can however see all kinds of politically horrible effects that the abolition of that disregard might have (widows made homeless when their partner dies in care, or less dramatic but more complex (and hence expensive to administer), charges placed on properties to be paid back at some unknown point in the future with a whole host of administration if the widow wants to move house or downsize or whatever) so I would be surprised if the relevant minister would be brave enough to attempt it.

Trusts created by giving your house away whilst you are still alive are almost always seen as attempts to avoid taxation and obscure assets from the authorities and treated accordingly - the reason for this is that they generally are.  Why would anyone give away their house but still try and keep the benefit?

Spivved1987

doodling said:

Hi,

Spivved1987 said:

doodling said:

Hi,

There seems to be a lot of confusion on this thread.

Immediate post death interest trusts created by will were, are, and are highly likely to remain, a perfectly valid and sensible inheritance planning technique.

Other approaches to placing property into trust, usually whilst the (now ex-)owners are still alive continue to present all kinds of risks and costs and continue to be a valid target for authorities wishing to fund care costs (and general taxation come to that).

Nothing has really changed. 

This comes back to my original question as to whether this has been tested yet in the courts. You are implying that placing your house in a Trust while you are alive seems likely to fall foul of DDoA rules, whereas willing it in Trust will not. If that is definitely the case, then I will sleep more soundly. But is there an equivalent case to The Coughlan Judgment in this area? Have any local authorities attempted to have a post-death Trust set aside?

IPDI (i.e. Will) trusts are generally used when there is a surviving spouse who continues to live in their jointly owned (tenants in common) house.  So we are talking about the situation where someone has received care and then died, leaving their spouse living in their house.

Note that holding your house as tenants in common (assuming a near 50/50 split) with your spouse is not deprivation of assets, merely making explicit what the law already considers implicit in a marriage.  I very much doubt that a government would be so foolish as to make it financially advantageous to divorce if one party needed care - that way lies massively increased care costs as older people might decide that they would be better off without their ailing partners rather than caring for them.

The current regulations made under the Care Act include a disregard for any jointly owned property which is occupied by a spouse (and was so occupied when their partner went into care).  The disregard is such that so far as the LA is concerned, that property doesn't exist and they must fund the care (assuming that there are no other assets).  (I leave it to you to consider whether having your care provided at the mercy of the LA is a good idea).

Given that position, I can't see how the IPDI trust would be open to legal challenge.

If you wanted me to try and predict a worst case scenario, one might imagine that at some point that the spouse occupation property disregard might be abolished.  That wouldn't have any impact on the IPDI trust as it could only cover any assets owned by the deceased at the time they passed away, but it might reduce or eliminate the value that would be placed in that trust.  I can however see all kinds of politically horrible effects that the abolition of that disregard might have (widows made homeless when their partner dies in care, or less dramatic but more complex (and hence expensive to administer), charges placed on properties to be paid back at some unknown point in the future with a whole host of administration if the widow wants to move house or downsize or whatever) so I would be surprised if the relevant minister would be brave enough to attempt it.

Trusts created by giving your house away whilst you are still alive are almost always seen as attempts to avoid taxation and obscure assets from the authorities and treated accordingly - the reason for this is that they generally are.  Why would anyone give away their house but still try and keep the benefit?

You have been a great help here. Thanks.

AskAsk

Spivved1987 said:

justwhat said:

Asset disposal cannot be left until last minute. It is not deprivation of assets if it is done before a care home is needed or expected to be needed. 

Also as an example - I am unsure if a trust deed that was drawn up 5-10 years before a person goes into a care home or is aware it will be needed, would be classed as deprivation of assets.

This is exactly what I'm relying on but as you say (and I alluded to in my initial post) you are "unsure if a trust deed etc" and that was why I asked if there had been any recent case law to make the unsureness a bit less unsure!

Another potential problem is that I think the Will does say something like 'under current legislation not eligible for reckoning in capital assessment for Care Fees' and this might be the clause by which the stupid solicitor may have hung me!

what i have found out about solicitors is that they know absolutely nothing about tax and anything that they know, they will never disclose as they are not insured as tax advisers.  therefore never rely on a solicitor to do anything for you tax related.

Spendless

I did wonder if you were talking about becoming tenants in common rather than putting a house in trust.

Recently my friends parents saw a solicitor about making their wills. The parents came home going on about trusts and care home fees and my friend believed they were being sold snake oil! Eventually it came out that they were changing the way they owned their home from JT to TIC. Friend  trying to understand what they were on about discovered more about her parents marriage than she ideally wanted to know because her Mum was cautious if she should go first she didn't entirely trust friend's Dad to re-marry to a lot younger woman (younger than friend) who had been on the scene only a few years earlier, hence wanting to do it. If only they'd explained that they meant becoming TIC to my friend! 

Spivved1987

AskAsk said:

Spivved1987 said:

justwhat said:

Asset disposal cannot be left until last minute. It is not deprivation of assets if it is done before a care home is needed or expected to be needed. 

Also as an example - I am unsure if a trust deed that was drawn up 5-10 years before a person goes into a care home or is aware it will be needed, would be classed as deprivation of assets.

This is exactly what I'm relying on but as you say (and I alluded to in my initial post) you are "unsure if a trust deed etc" and that was why I asked if there had been any recent case law to make the unsureness a bit less unsure!

Another potential problem is that I think the Will does say something like 'under current legislation not eligible for reckoning in capital assessment for Care Fees' and this might be the clause by which the stupid solicitor may have hung me!

what i have found out about solicitors is that they know absolutely nothing about tax and anything that they know, they will never disclose as they are not insured as tax advisers.  therefore never rely on a solicitor to do anything for you tax related.

My Will is not so much for IHT planning as Care Home Fees planning. I'm one of those rare breed who doesn't view tax as a mortal crime.

Spivved1987

Spendless said:

I did wonder if you were talking about becoming tenants in common rather than putting a house in trust.

Recently my friends parents saw a solicitor about making their wills. The parents came home going on about trusts and care home fees and my friend believed they were being sold snake oil! Eventually it came out that they were changing the way they owned their home from JT to TIC. Friend  trying to understand what they were on about discovered more about her parents marriage than she ideally wanted to know because her Mum was cautious if she should go first she didn't entirely trust friend's Dad to re-marry to a lot younger woman (younger than friend) who had been on the scene only a few years earlier, hence wanting to do it. If only they'd explained that they meant becoming TIC to my friend! 

We set ourselves up as Tenants in Common many years ago, unconnected to when I made the Will.

AskAsk

Spivved1987 said:

AskAsk said:

Spivved1987 said:

justwhat said:

Asset disposal cannot be left until last minute. It is not deprivation of assets if it is done before a care home is needed or expected to be needed. 

Also as an example - I am unsure if a trust deed that was drawn up 5-10 years before a person goes into a care home or is aware it will be needed, would be classed as deprivation of assets.

This is exactly what I'm relying on but as you say (and I alluded to in my initial post) you are "unsure if a trust deed etc" and that was why I asked if there had been any recent case law to make the unsureness a bit less unsure!

Another potential problem is that I think the Will does say something like 'under current legislation not eligible for reckoning in capital assessment for Care Fees' and this might be the clause by which the stupid solicitor may have hung me!

what i have found out about solicitors is that they know absolutely nothing about tax and anything that they know, they will never disclose as they are not insured as tax advisers.  therefore never rely on a solicitor to do anything for you tax related.

My Will is not so much for IHT planning as Care Home Fees planning. I'm one of those rare breed who doesn't view tax as a mortal crime.

same thing applies.  a solicitor will be useless for planning anything financial that is to avoid something.  a good solicitor would not want to get involved in that area as it isn't their area of expertise.