Putting a trust on parents bungalow

Liz65

Hi,  not sure if this is the right category, I apologise if it isn’t.

My father was to put his bungalow in a trust fund for me so that the government get less.

I don’t think he knows how it all works and nor do I but apparently if you have to go in a home and own a house or have savings that will go towards costs and would escalate quickly.

He believes that then they Would get help from the government but I am not so sure as the powers that be will probably realise why he has done it?  Confused.

Could anybody make this clearer for us or send us in the right direction.

Thansk

lisyloo

It depends on the reason it is done.
If it's done to not pay care fees then that's called deprivation of assets and can be clawed back.
If it's done for other reasons e.g. to avoid inheritance tax then that's allowable.
He should get this done by a proper company experienced in this area otherwise it could cause no end of problems down the line.

Do bear in mind though that local authority provision is very basic and may not be in a geographical area that's convenient for friends and family to visit. He may even have to share a room.
We visited about 20 care homes for my MIL and some we put in the "over my dead body" category as my SIL said "shes going in there over my dead body" and stated she'd give up work to avoid it happening.
As examples we saw dressings hanging off, dirty toilets and clients being cold due to lack of a blanket.

At the other end of the scale there are care homes that leave incontinent clients scrupulously clean, provide entertainment, day trips etc.

So have a think about what you want for your father.
For my parents I'd want to forego my inheritance in favour of them getting decent care.

trickydicky14

I have to agree with lisyloo, if you could find a way to avoid paying the government your father would get very basic care and to be honest that basic care should be available to those who have nothing at the time they go into a care home.

I personally would not feel comfortable knowing I have money in the bank and my dad is having a very basic existence at the end of life.

At the end of the day you pays your money and takes your choice. 

Keep_pedalling

Sorry, but he should not do this. It will be deemed as deliberate deprivation of assets if he needs residential care, it does not reduce IHT as it is a gift with reservation of benefit, and it is likely to lead to a CGT liability when it is eventually sold.

The only people who gain from these trusts are the salesmen who charge fat fees for setting them up.

Bravepants

If he does what he intends then morally he should not complain about the poor care he receives when he's older.

FlorayG

People commenting should note that this isn't the OPs idea, it's his father's idea and elderly parents can be difficult to convince that their comfortable old age is more important than leaving an inheritance to their children

xylophone

Suggest you read

https://www.ageuk.org.uk/globalassets/age-uk/documents/factsheets/fs40_deprivation_of_assets_in_social_care_fcs.pdf

https://advisingfamilies.org/uk/information-portal/planning-ahead/trusts-care-fees/#:~:text=What is 'deprivation of assets,a 'deprivation of assets'.

lisyloo

Liz - Can you confirm if there is a spouse or anyone else living there.
There can be IHT avoidance on second death for a couple.
Properties can also be set aside from care fees under certain circs.

If it's just your Dad it's hard to see what other reason there would be for doing this.

MEM62

Liz65 said:

My father was to put his bungalow in a trust fund for me so that the government get less.

Less what?

Liz65 said:

I don’t think he knows how it all works and nor do I but apparently if you have to go in a home and own a house or have savings that will go towards costs and would escalate quickly.

Ah! OK, he wants others to pay for his care so that your inheritance is preserved.  The moral issue with that, for me, is obvious.  Others will no doubt make the points about DOA and the fact that your father is, statistically unlikely to need long term care with a high level of medical support in the first place but the question really is, if the does need care, would you be happy for your father to spend his twilight years with no choice in where he lives and be placed in the cheapest facility that the local cash-strapped council can find just so you do not loose any of your inheritance?  

lisyloo

If someone needs a high level of medical support then they are funded by the NHS (CHC - continuing health care). The bar for this is high.
If they need some nursing care in a nursing home then they get Funded nursing care (FNC). This is not means tested.
So medical care in this country is free whether you are in a nursing home or hospital.

It's personal care that is means tested.

Albermarle

To add, trusts can also  be complicated/expensive to operate, and can even be liable for tax themselves  Also they can cause problems for estate executors.
That is even when they are a sensible idea, which this probably is not.