Asset life protection with discretionary trust

Pipsqueak71

My mum wants to do a trust and has been advised to take out the above Asset life protection with discretionary trust. She continues to live on her own in the property. We have been told we won’t face any fees or taxes or probate but now someone else says we will. Can anyone advise?
thanks in advance.

Keep_pedalling

She was either advised to do this by an idiot or someone out to earn high fees setting up a useless trust. It does not avoid IHT as it would be a gift with reservation, and it falls under deliberate deprivation of assets if this is some  scheme to avoid care costs.

She should avoid this like the plague.

Notepad_Phil

Pipsqueak71 said:

My mum wants to do a trust and has been advised to take out the above Asset life protection with discretionary trust. She continues to live on her own in the property. We have been told we won’t face any fees or taxes or probate but now someone else says we will. Can anyone advise?
thanks in advance.

Advised by who? Some salesman who'll be well out of the picture by the time that everything blows up, or someone who actually knows their way around trusts and the very few times that they make any sense.

poseidon1

Pipsqueak71 said:

My mum wants to do a trust and has been advised to take out the above Asset life protection with discretionary trust. She continues to live on her own in the property. We have been told we won’t face any fees or taxes or probate but now someone else says we will. Can anyone advise?
thanks in advance.

Complete utter nonsense.

Discretionary trusts have a role, but absolutely not in relation to the family home  occupied by the settlor of the trust. Despite the rubbish you were told:

1) Depending on the value of the asset going in, the creation of a discretionary trust is a chargeable lifetime transfer with IHT potentially chargeable at the rate of 20% on asset values exceeding £325k

2) If the asset is valued in excess of 80% of the NRB going into the trust, it is reportable to HMRC on IHT 100 with penalties for non compliance.

3) The trust is also required to be registered on HMRC trust registered, with further penalties for non compliance.

4) Every 10 years the Trust is revalued, and if the asset exceeds NRB the excess value is liable to IHT at 6%. Needless to say penalties for non compliance as well as interest running on any unpaid tax.

The above is a simple snapshot of the complexities and pitfalls of discretionary trusts.

People like yourself and and your mother are advised to stay well clear of these structures and the utterly unscrupulous unqualified salesmen that peddle them,

GDB2222

Pipsqueak71 said:

My mum wants to do a trust and has been advised to take out the above Asset life protection with discretionary trust. She continues to live on her own in the property. We have been told we won’t face any fees or taxes or probate but now someone else says we will. Can anyone advise?
thanks in advance.

If you want sensible advice, you'll need to provide a lot more information. Plus, you'll need to explain what the benefits of this trust are supposed to be. 

Marcon

GDB2222 said:

Pipsqueak71 said:

My mum wants to do a trust and has been advised to take out the above Asset life protection with discretionary trust. She continues to live on her own in the property. We have been told we won’t face any fees or taxes or probate but now someone else says we will. Can anyone advise?
thanks in advance.

If you want sensible advice, you'll need to provide a lot more information. Plus, you'll need to explain what the benefits of this trust are supposed to be. 

I think the sensible advice has been provided already by those answering before you!

Hopefully OP's mum can be persuaded that she doesn't 'want' to do a trust...

boingy

As a trustee of a discretionary trust I find the "no fees" claim laughable. The trust has existed for a couple of decades and the solicitor fees run into five figures and counting. Every time someone dies, or a trustee changes, or the rules change it involves a solicitor and the ones that deal with trusts don't tend to be at the cheaper end of the scale. There will be another fat set of fees when the trust is finally wound down. I still haven't got a clear picture of any tax liabilities that will be on top of that. 

Avoid a discretionary trust like the plague or be a slave to it for the life of the trust. 

Savvy_Sue

Marcon said:

Hopefully OP's mum can be persuaded that she doesn't 'want' to do a trust...

It's definitely worth the OP asking Mum to explain WHY she wants to do a trust, and unpick the reasons. Often people think (or have been told) "It will make things easier when I die" - it won't. Or "It will save you having to pay a shedload of IHT" - it won't. Or "It will protect your inheritance because it will mean the house can't be sold to pay for care home fees" - please don't get us started on that one! 

Of course, I'm no expert, but there's rarely (perhaps never?) a compelling reason to put a house in trust BEFORE someone dies, and even AFTER death it's not usual to need the house in trust. (Perhaps if the person inheriting lacks capacity, but that's a specialised area!)

poseidon1

Savvy_Sue said:

Marcon said:

Hopefully OP's mum can be persuaded that she doesn't 'want' to do a trust...

It's definitely worth the OP asking Mum to explain WHY she wants to do a trust, and unpick the reasons. Often people think (or have been told) "It will make things easier when I die" - it won't. Or "It will save you having to pay a shedload of IHT" - it won't. Or "It will protect your inheritance because it will mean the house can't be sold to pay for care home fees" - please don't get us started on that one! 

Of course, I'm no expert, but there's rarely (perhaps never?) a compelling reason to put a house in trust BEFORE someone dies, and even AFTER death it's not usual to need the house in trust. (Perhaps if the person inheriting lacks capacity, but that's a specialised area!)

With 'blended families' arising from 2nd marriages becoming more and more common, IPDI trusts are appropriate to ensure children from previous marriages will be fairly dealt with on death of the 1st spouse ( it is the only safeguard to prevent the surviving spouse from disinheriting children of the deceased spouse). However such trusts will always be life interest ( not discretionary), and automatically terminate on the 2nd death.

Must definitely agree there should no reason for trusts created during lifetime over a home the settlor is inhabiting, and other than for the very wealthy with access to specialist professional advice and ongoing administation services, discretionary trusts should undoubtedly be considered a 'no no' for the vast majority of the UK population.

Pipsqueak71

Thanks everyone, as it happens the person who set this up failed to register with HMRC for 8 months so we managed to get it cancelled. Should we be reporting this kind of advice and if so, who to? They appear to be self employed.

Keep_pedalling

Pipsqueak71 said:

Thanks everyone, as it happens the person who set this up failed to register with HMRC for 8 months so we managed to get it cancelled. Should we be reporting this kind of advice and if so, who to? They appear to be self employed.

Unfortunately not, these sharks are unregulated and while what they do is immoral it is not illegal.