Is a lifetime trust worth doing?

moneywisher

Is a lifetime trust worth doing to protect house from care fees to ensure children get the inheritence? Very simple, Mum owns the house, fully paid off, worth less than £300,000, only one child and is wanting to do this to protect the inheritance for myself.

I know she has to survive for 7 years after doing it or the council can still use the house to pay for care but are there any other reasons not to do it?

Keep_pedalling

What you think you know is wrong, deliberate deprivation of assets has no time limit, you are confusing that with the IHT 7 year rule which would not apply in this case anyway as it would be classed as a gift with reservation of benefit because.

There is also likely to be a capital gains tax liability when the house is eventually sold.

I will also add that she (and you) should look at what relying on a cash strapped LA to fund your would entail with regard to when and where such care would be provided. I can assure you as someone who has had experience of this neither of us is prepared to risk that fate.

mta999

No it won't work - the LA have seen it all before....

If ever your Mum needs to apply for means tested benefits (such as care home funding) they will ask a lot of questions and putting the house into a lifetime Trust will raise a big red flag

Savvy_Sue

Please, whatever your situation, try to persuade your mum that 'your' inheritance is of far less value to you than knowing that whatever happens, she will always be able to have the best care to enable her to live the fullest life of which she is capable. Plus, if you actually check the numbers, far fewer people end up in care homes than we tend to think, and once they're in they don't necessarily live that long. So the cost of a care home relative to the value of a home is generally not that significant.

Encourage her to spend her money on making the house and garden future-proof, or on moving somewhere where that's possible. Encourage her to do whatever's needed to remain in the best possible health.

Albermarle

Apart from the fact it will not work, it would be expensive to set up and operate.

Plus does it seem right to try and push her care costs on to other council tax payers ?

poseidon1

Putting aside the moral and practical issues highlighted by others, a gift of the home into trust would trigger the following:

1. Registration of the trust on HMRC's trust register.
2. Reporting of the trust creation to HMRC's separate IHT compliance division via form IHT 100.
3. On each 10th anniversary of the trust creation, the house has to be revalued and if that exceeds £325k ( currently), IHT is payable at a 6% rate on the excess from a trust which presumably has no cash of its own.
4. On death of your mother, assuming the trust is then terminated there maybe a further IHT exit charge by reference to the last 10 year anniversary.
5. CGT may also be payable on any house price growth by reference to the valuation at date of gift into trust although that should be substantially mitigated by your mother's personal private residence exemption which the trust is permitted to claim.

If you want to see all these unfortunate and complex elements in play in an actual case on this forum see the recent post below -

https://forums.moneysavingexpert.com/discussion/comment/81964166#Comment_81964166

.

At least that poster had the benefit of competent professional assistance from a solicitor and accountant. I would very much doubt your mother's modest £300k home justifies this level of professional costs and complexity.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81966791#Comment_81966791

If your read certain sections of the media, you could be forgiven for thinking that nearly all old people lose their homes to the local council.

It does happen, but only to a small %.

Savvy_Sue

https://forums.moneysavingexpert.com/discussion/comment/81966978#Comment_81966978

Oh I agree. I think if I read those sections of the media, and then looked around, it would astonish me how many 'old people' are still out and about every day, leading their lives, living in their own homes, sometimes even ON THEIR OWN with no-one looking after them, poor dears.

But I guess I'm too busy hanging out with some of those 'old people' …

Marcon

Is a lifetime trust worth doing to protect house from care fees to ensure children get the inheritence? 

Source: https://www.saga.co.uk/magazine/life/paul-lewis-on-care-homes-who-pays-and-who-doesnt?srsltid=AfmBOopNYdR-DMEZjBLis9OMOk9z_1M55jXo5CKR3oxOGhdrs4xW5AGh