Gifting a house to children to avoid care home fees...

oxfordgirl_2

Hi everyone we're currently in the process of sorting out power of attorneys for mil health & money the solicitor dealing with it has also brought up about gifting / putting her house into a trust with the 3 children being trustees, I believe it's a living trust so mil still lives there until she went in a home or died. I think he's recommended it as to try and avoid care home fees if it came to that ( no inheritance tax as there isn't that much money) Me and hubby have looked at this before and don't think it's a great idea bil is money mad and thinks it's a great idea lol I believe the solicitor is just pushing it really for more money for himself 💰 ... we've asked the solicitor a couple of questions but he seems to skim round the answers 🤔  asked about the 7 year rule he says mil is currently in good health ( 84 had 3 bad falls in the last 12 months resulting in a broken back and broken hip doesn't go out the house alone unless taken in a wheelchair or with a frame but does get around the house herself, to me not brilliant health and think government would be all over it for depreciation of assets.... we also asked if any trustees were claiming any benefits would they be affected he says no I'm sure I've read they are but can't find where I read it now....  also the bit about any trustees divorcing, dieing or going bankrupt he's saying nothing about that....  If anyone can answer any of the above or let us know of any more pitfalls It would be very much appreciated. TIA.

mebu60

Research 'deprivation of assets' rather than 'depreciation'! And if not paying for care (if and when needed) some of the council funded homes are pretty grim.

Also potential CGT liability when you come to sell the property. If MIL is within IHT then money-mad BIL would be better off inheriting without a CGT bill. 

elsien

There isn’t a seven year rule when it comes to  deliberate declaration of assets.
https://advisingfamilies.org/uk/inform

what happens if mother-in-law wants to downsize or move somewhere more accessible?
And I often say this on here but I think it is worth repeating yet again. Money gives choices. Homes at the cheap end of the market have no extras in terms of activities or supporting people to go out to the shop or trips out or whatever.  

And however much well-meaning relatives say yes we will do it, often when push comes to shove it doesn’t happen. 

elsien

And I agree with you about the definition of healthy. At her age and with her current support needs there is a reasonable expectation she may need care at some point in the future. It would be hard to argue that the trust would be there for any reason other than to avoid care fees.

Keep_pedalling

This would be an incredibly stupid thing to do. Apart from deliberate deprivation of assets would she really want to be dependant on a cash strapped LA for care if she needed it? From experience I can tell you that any residential care that would be offered would have to wait until she was very decrepit as funding won’t be offered until that happens and the choice of where care is given is getting more and more restricted. 

kipsterno1

I think you might be right with your suspicion that the solicitor see you as a cash cow. LPA's are a relatively simple document to complete online via the OPG website and much cheaper than people think. Don't get me wrong though if a will is needed get this done via a reputable solicitor.

Marcon

oxfordgirl_2 said:

Hi everyone we're currently in the process of sorting out power of attorneys for mil health & money the solicitor dealing with it has also brought up about gifting / putting her house into a trust with the 3 children being trustees, I believe it's a living trust so mil still lives there until she went in a home or died. I think he's recommended it as to try and avoid care home fees if it came to that ( no inheritance tax as there isn't that much money) Me and hubby have looked at this before and don't think it's a great idea bil is money mad and thinks it's a great idea lol I believe the solicitor is just pushing it really for more money for himself 💰 ... we've asked the solicitor a couple of questions but he seems to skim round the answers 🤔  asked about the 7 year rule he says mil is currently in good health ( 84 had 3 bad falls in the last 12 months resulting in a broken back and broken hip doesn't go out the house alone unless taken in a wheelchair or with a frame but does get around the house herself, to me not brilliant health and think government would be all over it for depreciation of assets.... we also asked if any trustees were claiming any benefits would they be affected he says no I'm sure I've read they are but can't find where I read it now....  also the bit about any trustees divorcing, dieing or going bankrupt he's saying nothing about that....  If anyone can answer any of the above or let us know of any more pitfalls It would be very much appreciated. TIA.

Too late. See https://www.radiotimesmoney.com/retirement/hold-onto-your-house/

KxMx

Keep_pedalling said:

This would be an incredibly stupid thing to do. Apart from deliberate deprivation of assets would she really want to be dependant on a cash strapped LA for care if she needed it? From experience I can tell you that any residential care that would be offered would have to wait until she was very decrepit as funding won’t be offered until that happens and the choice of where care is given is getting more and more restricted. 

In the case of my friends Granddad, 3 years past when he needed residential care.
LA funded maximum care visits and pressured family to call in on top. 
LA ignored pleas from not just family to fund residential care, but many other professionals involved. 
Gentleman only went into residential care as had a bad fall, admitted to Hospital & they refused any discharge other than residential home.
Gentleman is not even "safe" now, he is regularly assessed to see if he's eligible to be sent into sheltered housing.
Man in question is very far gone dementia wise! 

Emmia

The primary concern of the family should be ensuring that MIL has the care and support she needs for the rest of her life. If that involves selling her home and using all the funds realised to achieve it, so be it.

I know that there can be an "expectation" of inheritance from children, and a desire for parents to "leave something"... But that should be money left over once the person has lived their life, in the best way possible.

tooldle

My OH is a trustee. The house was owned solely by one parent with the remaining parent having the right to remain in the home. The remaining parent becomes a ‘beneficial owner’ (I think this is the right term). The trustees do not own the property, even if the deceased’s will leaves them a share, until such time as the right to remain is extinguished. 

I’d also add, my parent died from dementia after a care home stay of over 10 years. My opinion formed from this experience is, to go for the best care that can be afforded. 

RAS

tooldle said:

My OH is a trustee. The house was owned solely by one parent with the remaining parent having the right to remain in the home. The remaining parent becomes a ‘beneficial owner’ (I think this is the right term). The trustees do not own the property, even if the deceased’s will leaves them a share, until such time as the right to remain is extinguished. 

This sounds like an Immediate Post Death Interest Trust, created by a will when the parties own property as tenants in common. The first deceased leaves their half to descendants and life interest to the other owner. But ownership does not transfer until the second party dies, or another condition is met.

That ensures the descendants inherit half the value of the property even if the remaining owner goes into care or remarries, subject to some adjustment if the remainer is entitled to interest from the capital once the house is sold, for example.

This is completely different to a trust set up by one or more living owners to transfer ownership from a defined date whilst they continue to occupy the property, suggested by this solicitor. IHT isn't an issue in this case but it would be a gift with reservation if the estate was in IHT territory. 

Moving/downsizing can be a little more complicated with an IPDI trust in place rather than sole inheritance, but that could be even more of an issue with the "life trust" being suggested by lawyer. The "life trust" comes with further complications regarding taxes and trustees' liabilities. 

Neither the donor or the potential beneficiaries are being well advised.