It is probably never too early to put your financial affairs in order. Whenever you die, you want to be sure that your estate – your property and the possessions you own – passes to the beneficiaries you choose.
The cost of care
Moreover, the rising costs of long-term residential care for the elderly – in 2017, the Paying for Care organisation estimated the average cost to be £31,200 a year - or £43,732 if residential nursing care was also required.
Typically, local councils are prepared to help meet those costs, but only if your assets – including the home you own – are valued at less than £23,500. The overwhelming majority of homeowners, therefore, are likely to have to meet all of the costs for any residential care they need in their old age.
In an attempt to avoid that cost or contribution, an increasing number of people may be tempted to put their property in Trust. Once your home is transferred to a Trust, you no longer own it – the Trust does. When it comes to the local council means testing your ownership of assets, therefore, the (significant) value of your home may be disregarded.
In an article on the 11th of January 2018, however, the Telegraph newspaper published a warning about putting property into Trust for the express purpose of avoiding care home fees. Not only might such “deliberate deprivation” fail to satisfy the council’s means testing standards, but may also be considered an incidence of criminal fraud – for which you might be prosecuted.
If you are thinking about putting your home into Trust in order to avoid paying care home fees, therefore, you need to take independent financial advice before doing so.
Although independent financial advice may still be recommended, you are likely to be on much safer ground when it comes to putting your home into Trust in order to manage your Inheritance Tax liabilities.
The same principle applies in that property transferred into Trust is no longer owned by you – or your estate when you die – and is therefore exempt from the calculation of any Inheritance Tax liabilities.
Indeed, the principle of putting your home into Trust in order to manage Inheritance Tax is such a long and well-established concept that it is described in some detail on the government-backed website, the Money Advice Service.
Insurance for property held in Trust
Once it is put into Trust, you may no longer own your home, but you, your beneficiaries and the Trustees all have an interest – and, in the case of the Trustees, a legal obligation – to safeguard the property through appropriate insurance.
Our Guide to Property Trust Insurance may help to illustrate the potential complexities and implications of putting your home into Trust and the importance that adequate insurance continues to play.
It is essential, for example, that it is absolutely clear that ownership of the property lies with the Trust you have set up and that insurance is duly arranged in the name of the Trust.
Our Guide helps to make clear why property Trust insurance may play such an essential role in safeguarding your home whilst it remains in Trust.