Is a Will Trust worth the admin ?
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Hi Dox, Keep Pedalling, yes, I am coming to those conclusions too. As long as she lives in the house there is no risk of her losing her house and frankly, if she ever did need care, then all of the money would be spent on her anyway and that would involve selling the house.
Perhaps doing it this way (tenants in common/trust) it might just eek out the money for her being able to stay somewhere nicer for longer (eg. if the LA were contributing something then we could top it up so she was in a nicer place if she needed full time care for a long time) or at least give us flexibility down the line if a different plan became obvious. I guess within 2 years of Dad’s death we might know better what she wants so it might give us options. We can always vary back to the default of everything going to her.
It has been reassuring to think it all through though and realise it is not such a big problem. I really appreciate your thoughts and time spent answering.0 -
Half a house has a value of close to zero to a willing buyer on the open market. That is the amount the local authority would take into account.
In the vast majority of cases the person going into care will be the sole occupant, and there is nothing difficult about selling a jointly held property in those cases. Even if another of the owners was in occupation they would have to be a child under 18 or a relative who was disabled or over 60 for the house to be discounted entirely, although 10% of the value could be taken off where selling is difficult.
https://www.ageuk.org.uk/information-advice/care/paying-for-care/paying-for-a-care-home/do-i-have-to-sell-my-home-to-pay-for-care/
Anyway if what you say was true then taking action that took an asset out of reach of the assessment simply to avoid care costs would be treated as deliberate deprivation of assets, so you would still be assessed as having that asset.0 -
What i stated is true. Half a house has close to zero value to a willing buyer on the open market. It is this value that the local authority has to take into account if the house is held as tenants in common.
Deliberate deprivation is another matter.
See section 5 of https://www.ageuk.org.uk/globalassets/age-uk/documents/factsheets/fs38_property_and_paying_for_residential_care_fcs.pdf
The guidance says that if you jointly own property or land, the local
authority must base its valuation on the sale value of your beneficial
interest to a ‘willing buyer’, on the open market, at the time of your
financial assessment.
They should not simply assess the value of your property as a whole (or
equivalent properties), divide up the shares owned and say this is the
true value of your beneficial interest. The value of your beneficial interest
depends on how attractive it is to purchase. This can include a nil value.0 -
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It is incorrect to assume the LA would conclude 'deprivation of assets' should any assets be redistributed. The AgeUK site is best for explaining circumstances where it may/may not be considered.
https://www.ageuk.org.uk/information-advice/care/paying-for-care/paying-for-a-care-home/deprivation-of-assets/
We used a STEP member solicitor to advise, & prepare, a DoV 2 years ago to divert (for want of a better word) a £100k inheritance we did not want to our 2 grandsons (minors). Doing so hasn't, & won't in the future, have any negative impact on our ability to fund care home fees.
On top of which is the fact that when the DoV was actioned there wasn't, & still isn't, any sign whatsoever that we'll need a care home. Therefore the LA would have an almighty job to ever reach the conclusion that we had deprived ourselves of assets with the use of a DoV. It's too easy to assume that any/all redistribution of assets counts automatically as deprivation, it doesn't.
We severed our joint tenancy in favour of tenants in common many years ago (there is a Form A Restriction reflected in the paperwork held by Land Registry, the severance paperwork was sent to them), & our Wills contained instructions for a Nil Rate Band Discretionary Trust to be set up.
This was fine for several years BUT with the implementation of the Residence Nil Rate Band it became a bad idea. The RNRB property tax break is lost if the property is dumped into a trust & not left directly to a close family member. So you don't want one of those!
We've left our ownership as TiC but had new (temporarily suitable) Wills written, with the intention to change these again in the not too distant future - most likely to leave our individual share in the property to our son & include a life interest trust, with suitable clauses for certain considerations (maintenance responsibilities, selling to wrap up the trust etc).
Good luck with this, as YM99 suggested several posts back, STEP member solicitor is the way to go.Seen it all, done it all, can't remember most of it.0 -
Thanks Sevenofnine for the link and for giving details of what you have done, really interesting.
In relation to deprivation of assets, it seems that the timing is important. The local authority must decide whether at the time you could reasonably expect that you would need care and support. If you were fit and healthy, and could not have imagined needing care and support at the time, then it may not count as deprivation of assets.
We have booked an appointment with a STEP solicitor so I will update the thread with what we decide to do in the end in case it helps anyone.0 -
So, just in summary in case it helps anyone else, this is what we did.
My parents sent off the SEV Tenants in Common form to the Land Registry and attached the original signed and witnessed document they had done in 2000. The Land Registry updated their records and sent back the title deeds showing a restriction in B: Proprietorship Register. The wording is in very “legalese” language but apparently it records the severing of the joint tenancy (I checked by phone.)
We had both of my parents wills drawn up by a firm of solicitors whereby on the first parent’s death, the house passes into trust for my brother and myself but the other parent has the right to live there as normal until their death (and can sell/move/ use all of the full house proceeds to move house etc). We decided this was just a good level of comfort for the other parent to have and did not involve too much trust admin. We all then decided that half of the money would pass straight to my brother and I on the first parents death. We could have put this into a trust again but, because you generate income from the interest it would mean having to prepare trust accounts, tax returns and deal with a lot of admin (although I think there are some types of investments you can use that may avoid this). It seemed simpler for us to have the freedom to invest the money as best we can for the other parent to be able to look after them. The house in a trust does not have that problem as there is no income being generated. Obviously you need to totally trust your other family members to be able to do this so it will definitely not be the best way for everyone. We also always have the deed of variation option down the line too.
Anyway, it has been a huge learning curve but it is good to have it all sorted. They are paying a good sum for carers now in the home and getting an excellent service. I think all of this has just provided some comfort for them that we will keep some sort of control on being able to direct their money where they will get the most benefit. Now our job is to encourage them to enjoy spending more while they still can!
Hopefully this may help others too.0 -
Carinae, From this post you seem to have gathered all the information needed and will have by now understood that the Trust is a 'Lifetime Interest Trust', also known as an 'Interest in Possession Trust' and not a Discretionary Trust.
You mention about possible investment of Trust funds at a later date and it could be prudent to consider equity Funds rather than Shares as Funds have growth rather than interest, which may bring taxation of the Trust into account and become far more complex with tax returns. As far as Capital Gains Tax is concerned, there would be some allowances and the taxation would depend on how much gain there was over what period of time.
Many people considered the Will Trust to reduce the overall Inheritance Tax liability, but with the additional Residence allowance that can increase the individual allowance to £500,000 and be transferable to the survivor, so £1 Million between a couple, the benefit of such Trusts has been reduced, but a good STEP solicitor, although costly, is well worth it.
Good luck.I'm a retired IFA who specialised for many years in Inheritance Tax, Wills and Trusts. I cannot offer advice now, but my comments here and on Legal Beagles as Sam101 are just meant to be helpful. Do ask questions from the Members who are here to help.0 -
We understand that this could ring-fence some of their assets from care home fees.
Yes that's correct. Whoever dies first, their share is protected
I don't believe that is correct at all, in that no extra "reassurance" is needed . If dad needs to go into care, mum can stay in house as long as she wants, assuming she is over 60, which sounds likely? (And vice versa for dad if it comes to that).I understand that a Will Trust gives Mum extra reassurance that she can stay in the house whatever happens
If mum needs to go into care, and dad has died, then the house will be sold to pay for care. If she doesn't need to go into care we'll then it won't. What sort of circumstance were you envisaging when mum woudl be evicted ?0 -
Is a Will Trust worth the admin
In the simplest form of a IPDI trust with just the 1/2 house as the only assets within the trust the admin levels are close to Zero.
This is the typical/traditional protect the 1/2 house from care fees with a life interest for a spouse.
For all practical purposes(including IHT and CGT, transferable nil rate and the new RNRB) this is as if the spouse inherited just it has a wrapper to protect from asset grabs.0
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