“Families are being put at risk by unregulated firms promising to help them avoid care fees and inheritance tax, lawyers and financial advisers have warned” - www.telegraph.co.uk
We as a Firm have been approached on numerous occasions by clients to discuss schemes to cut IHT and care fees, such as placing family homes into trust whilst they are still alive.
We do not feel that these types of trust are advisable and, in some cases, may end up having dire consequences. At the least, the former home owner will lose the right to use their home as they should be able to, such as for equity release and will be relying on the new owners (the Trustees) for any sale or change of property. In some cases, they may not even know the Trustees. We have had instances where the Trustees were based in Scotland many miles from the home due to the draftsman having a connection with a Scottish Company.
“The kind of people attracted by these firms are of a generation that want to protect wealth and who are not expecting to have to pay for care. To me it’s quite a cynical business model, they are going after people who are potentially vulnerable and are being told what they want to hear.” - Richard Bates, Coole Bevis Solicitors
As these types of transactions take place pre death, they may be seen as attempts to avoid care fees and could fall foul of the law and even be seen by the Local Authority as potential fraud.
The Local Authority have powers to chase individuals for cash under “deliberate deprivation” rules. This is where they can prove someone has reduced their assets with the intention to claim help from the state. They can then be made bankrupt (with all the associated costs) and the property transaction overturned.
Life Interest Trust
We feel that a solution, should you be concerned about care charges may be to execute a Life Interest Trust in your Will, so called “Bloodline Wills”.
If you are a couple who own a property together, you are able to give each other a life interest in your property in your Wills which means that on the death of the first of you, the survivor will be able to live in the property until their death. They must repair, maintain and insure the property. If they were to remarry or permanently live with another partner, the life interest can continue. If they would like to sell and move to another property, this can be allowed. If and when they die/remarry/cohabit, then the property will form part of the first to die’s estate. As this is a decision made in your Will and only to take effect upon your death, there can be no deliberate deprivation of asset suspicions.
This means that the deceased spouse’s share of the property will not form part of the survivor’s estate and not be open to assessment for care fees. Also, it has the added benefit of allowing you to ensure your children, or other beneficiaries to receive at least a half share of the house. Ideal in a situation where you have children from another marriage or are concerned about a second marriage.
We would advise you to see legal advice from a Firm regulated by the Law Society and the Solicitors Regulation Authority (SRA) such as Paul Robinson Solicitors. We have experience Solicitors and Legal Executives who are members of and regulated by such respected organisations such as the Society of Trust and Estate Practitioners (STEP) and Solicitors for the Elderly (SFE) so you can be sure of getting sound and up to date legal advice as well as the security of the SRA safeguards such as continuing secure storage of your documents.
Due to recent changes in legislation, the IHT threshold is more generous than it has ever been. Please fee free to contact us for a meeting to discuss your estate and drafting Wills
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