For many people, the home they own represents their single most important asset. It is one they have almost certainly worked long and hard to buy and one which they hope to pass on to their children as a form of inheritance.
One of the ways of ensuring that your wishes as to the future of your home are respected – and typically allowing you to continue to live in the home whilst you need to – is through placing the property in Trust.
Trusts are an established way of creating an entirely separate and independent legal entity. There are so many different types of Trust, so there should be a specific solution for your own particular needs.
There are Trusts specifically designed to pass assets to minors, for example, others used for shares and investments from which the beneficiary may gain an income, Trusts which grant Trustees greater flexibility in how the assets might best benefit the beneficiaries, Trusts which accumulate interest earned by the assets placed on Trust, and Trusts which may be a blend of all these different types.
With the help of legal advice or specialists in the setting up of a Trust, you are likely find the process simple and straight forward.
But why set up a Trust?
There are a number of compelling reasons:
- you might place your house in Trust to avoid care home fees – a report in Health Insurance and Protection Daily, December 2015, for instance, suggests that annual care home costs might reach £51,800 by the year 2035;
- despite these huge costs, national guidelines currently impose a limit of just £23,250 in assets and if you own more you must pay for all of your care fees yourself – even if that means selling the home you own;
- by placing your home in Trust, however, ownership is transferred to Trustees, you no longer own the property and it cannot be included in the local authority’s means test of your ability to pay care home costs;
- you might also use the protection of a Trust to make sure that your children ultimately benefit from it in the event of your surviving spouse remarrying and effectively “disinheriting” your children;
- with appropriate professional advice, you might also be able to use a Trust to reduce your liability for inheritance tax and, in any event, are likely to find the costs of probate considerably cheaper since the bulk of your estate has already passed into the ownership of Trustees.
How to insure a house placed in Trust
Arranging insurance for your home after it has been placed in Trust is essentially no different than before – subject to some very important considerations:
- even though you might continue to live in the home, you no longer have an insurable interest in the building – this interest falls to the new owners, the Trustees;
- the Trustees have a duty of care to ensure that the home remains properly insured, both from the risk of loss or damage to the building or from claims alleging public liability;
- a failure to exercise this particular duty of care may result in the Trust leaving the property uninsured and any subsequent loss or damage might result in claims of professional negligence on the part of solicitors or accountants who may also be Trustees or working on behalf of the Trust.
If you are considering placing your home in Trust, therefore, it is important that the Trustees are fully aware of their responsibilities with respect to insurance.