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Hello and thank you for your question. I will be very pleased to assist you. I'm a practicing lawyer in England with over 10 years experience.
May I clarify that this is intended to take account of care fee costs please?
Yes. We are both active pensioners
my apologies for the delay in reverting to you. You mention you have obtained a leaflet. is this leaflet form a company offering such trusts or from a firm of solicitors?
May I ask if your estate is likely to be subject to inheritance tax? Between you and your wife, you have £650,000 before inheritance tax will be payable
From a company offering such trusts. My sister passed it on to me. Im just not sure what to do, her situation is a bit more complexed as has a disabled son but is happy about her trus,t but I hadnt heard of these trusts before. I don't want to spend money if our assets are not protected for our two children. No not subject to inheritance tax
You should be cautious with these trusts. There are some significant downsides to gifting your property into a trust. Firstly from an inheritance tax point of view, though not relevant here from what you say the transfer could be caught by the gift with reservation rule if it is still lived in by you and so although the property would be no longer in your estate, it may still be counted from inheritance tax point of view as being notionally within it unless you pay rent to the trust. In addition, depending upon the type of trust used, your property may be liable to capital gains for the period it is in trust to the date it is sold as the property could lose its principal private residence relief.
In addition, if you had to enter into care in the future, the transfer into trust could be potentially reversed by the local authority if they can show that a principle motivation for putting the property into trust was to avoid care fees. Companies such as that you refer to can make this very easy for local authorities because the company marketting brochures do the LAs hard work for them in grandly promoting trusts that allow you to avoid care fees.
For this reason many profession practioners take a view that such trusts offered by such companies with the marketing material that goes with them can easily fail because their marketing material can make it easy for councils to effectively overturn them.
Finally you may want some choice as to care home and may want to top up fees or pay to live in a home of your choice. Transferring into a trust potentially disadvantages you unduly. There can also be not insignificant fees as you are very well aware in setting up and running the trust which may ultimately not work. They are by no means as foolproof as some of the providers would have you believe nor do they necessarily solve anything.
That is all very negative. On the other side of the equation, trusts used carefully br qualified professional solicitors can be effective and can preserve many of the tax advantages of your property as it is now and shelter assets and trusts provided for in wills can also do so very cost effectively in terms of the cost of setting them up.
As above you could consider a life interest trust set up in your wills. This can be effective because if one of you had to enter into care the house is disregarded if the other still lives there or a relative lives with you over the age of 60. If one of you passes away you can leave your half share in the property to a life interest trust. This means if the survivor then has to go into care the council can only access the survivors half share and as a bonus because of the rules the councils have to follow in valuing that half share (called CRAG) the value will be less sometimes far less than markeet value for means testiing purposes - this is because they have to value the half share considering the other hald if owned by a trust which may not be willing to sell. The only significant risk left by this arrangement is if you both had to enter in care together. This is comparatively rare.
Is there anything above I can clarify for you?
If we go for the life interest trust, can we each name our children in this trust so whichever one dies first they will own half of assets, and if we die while either one of us is still living in property, they will get whole estate. Does all this require a specialist solicitor, if so who do we look for?
a life interest trust provides that the survivor of you would have a right to continue to enjoy and live in the property until death and after death, that share passes to one or more persons you nominate-this would typically be your children however does not have to be. If you nominate your children, they would have no right to interfere in the property until the death of the survivor of you both however after that time, they would be entitled to inherit the share placed in trust
a solicitor that specialises in private client work can assist you with setting up the above arrangement of this is your preference. You will be able to find such solicitors in almost all firms of any significant size
Are you happy with the information I have provided to you above or is there anything above I can clarify for you any further?
Thank you very much, You have been very helpful. Wil lnot hesitate to use you again if needed.
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