Question on life trust and care home fees

marcusjm

Hopefully one of you geniuses will be able to assist.

I agreed to be executor to a friend's father's estate. Him and his wife owned their home as tenants in common. He passed away and the will states that his estate be put in trust, and his surviving wife be a life tenant and able to live in the property rent free. The trust period will end when she dies.

She was moved to a care home last year and the property is now sold. The solicitor has told me to set up the trust, but I have questions that he appears to be unsure of.

I have acted as an executor in the past, but do not have experience with trusts. It is a new one for me, that putting his part of the home into trust will stop the local authority from using it to fund her care. If she has a life interest in his estate, surely the local authority would consider this part of her estate for care home funding.

Does anyone have any experience with this? Thanks in advance.

Savvy_Sue

Apart from the house, is her 'liquid' estate adequate to fund her care home for the remainder of her likely life expectancy, plus a lot? I ask because her family may prefer her to continue being self-funding, using the proceeds of the house, rather than facing the possibility of being moved to whatever the local authority is prepared to fund.

In such a situation, a Deed of Variation might be useful.

Keep_pedalling

Depends on the exact wording of the will, but if the trust is to remain in place then the widow will be entitled to the income but not the capital so only the income counts towards any financial assessment.

The trust should already have been registered with HMRC

poseidon1

Firstly the will itself is the trust document and all your duties and obligations derive from it. So there is no trust to 'set up', it came into exsistence on the death of the husband.

So the next question is what did the will state should happen to the trust property in the event that the widow is unable to continue residing there? If the will states that any property sale proceeds continue to be held in the trust and invested to provide the widow with a continuing income, then that is now what you are required to do. Does the will make such a stipulation?

As for the trust capital, does the Will grant you as trustee discretionary powers to apply the trust capital for the benefit of the widow if you consider that appropriate? - ie does the will state the financial welfare of the widow is paramount above all other considerations ?

As far as local authority assessment is concerned, the widow will have an income entitlement to any income the Will may have stipulated but not trust capital, so only the widow's personally owned half share of the house is taken into account for assessment purposes

In passing , who is supposed to benefit from trust capital on death of the widow ( known as Remaindermen)? Depending on age and state of health of the widow, you may have a duty to balance the income interests of the widow with the capital expectations of the Remaindermen.

If this trust has never been registered with HMRC, you should do so ASAP via the link below-

https://www.gov.uk/guidance/register-a-trust-as-a-trustee

If you are required to invest the trust fund, it will be a taxable entity in its own right, so you may require assistance with trust tax compliance and accounting. Doesn’t sound like the solicitor you are dealing with has much competency in this area.

Finally are you the sole trustee here? If so think about appointing a co-trustee in case anything happens to you, or for whatever reason you are unable to continue to act.