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JGM, Solicitor
Category: Law
Satisfied Customers: 12195
Experience:  30 years as a practising solicitor.
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I am 82 and in reasonably good health. I have a house which

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I am 82 and in reasonably good health. I have a house which is valued at around £400K. I have a will leaving all my estate to be divided among my three sons when I die. I have a sizeable investment bond and which I need not touch and a very adequate income. It has been suggested that I leave the house in "Trust" for my sons which will protect it in case I outlive my good health and have to be taken into care. Are there any disadvantages?
Thank you for your question. I am a Scots solicitor and will help you with this.
There are disadvantages to putting your house in trust. The trust will have a potential capital gains tax liability on an eventual disposal. The transaction could be looked on as depravation of assets by a local authority were you to require nursing home care. However, if yoir main aim is to avoid the house being used to pay for care then I wouldn't necessarily worry about that as from what you say your income and investments would pay for that.
I do think, however, that given the size of your estate, you may need some specialist advice on Inheritance Tax Planning. That in itself may involve setting up a trust or even transferring the house inter vivos to your sons with a formal leaseback by you and payment of rent to your sons to avoid any issues of inheritance tax involving the house. If you don't pay a rent it will be treated as a gift with reservation and tax would remain payable. In addition, you would have to survive seven years from the transfer to allow the house to be exempt from your estate for IHT purposes. Again this may have CGT implications but they could be outweighed by the IHT saving.
I think you benefit from a face to face meeting with a qualified financial adviser before making any final decisions.
There is another advantage in organising your affairs in order to save Inheritance Tax and that is that because such schemes are for the better management of your affairs and less likely to be challenged by a local authority in the event that you do seek funding for your care.
I hope this helps.
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