PROTECTING ASSETS, including THE FAMILY HOME

Protecting the family home

For most people home ownership means a place to live and an inheritance for the children. The family home is an asset worked for over many years, and one most families want to retain. Many now regard this wish as being at risk.

A Home Protection Trust can help to secure the home for this and future generations and ensure the family home passes to family when no longer needed.

You may be unfamiliar with the concept of a “Trust”.  Basically property is owned and managed by one party (called the “trustees”) for the benefit of others (called the

“beneficiaries”).  The trustees have legal title to the property but they are required to deal with the property in the interest of the beneficiaries. The beneficiaries do not have legal title to the property.  The document setting up the arrangement is called a “Deed of Trust” and the person or people who set it up are usually called the “Settlors” in Scotland  or “trusters”.  Whilst any asset could in theory be put into the trust, to avoid potentially costly tax implications and ongoing legal and accountancy costs if income generating assets are put into trust, it is often much easier, cheaper and less time consuming to simply put the family home into the trust.

What might this mean for you and how is this achieved?

By placing your home into a trust you can continue to live in the property for the rest of your life, or until you have no further need for it. If in future you wished to move to another property, that can be done and you would retain all rights to live in the new property.

Ownership and control of the house passes to the trustees. These trustees are chosen by you and will usually include you and perhaps another family member so that you retain control.  Sometimes you may wish to appoint a solicitor as a trustee but this is by no means essential.

The Deed of Trust will give the trustees powers to deal with your home and tell them what they can and cannot do with it.  These powers tend to be widely worded to that the trustees can decide what is appropriate at the time.

Usually the beneficiaries in the trust will be you during your lifetime and your children on your death but all cases are different and members of our ARCS team will go through the options with you.

The terms of your own trust will ensure that when you die (or when you no longer need to use the house yourself) your home passes to those you wish to benefit from it.

It is important to note that under current tax rules using a Home Protection Trust will not remove the value of your home from your estate for Inheritance Tax purposes (even if it is transferred into the trust more than 7 years prior to your death.)

 The benefits of the scheme.

  • As a trustee you continue to take decisions about the property.
  •  You continue to occupy the property but you pay no rent.
  •  The overriding benefit of such a trust is that the asset within it (your home) can be protected from threats which might otherwise affect it were it to be held in your own name. The property is better protected against financial assessment as it separates the ownership and control of your home legally from the people who are entitled to use it i.e. you!

For example, this should mean that the value of the house is excluded from any future assessment for residential care.  If you do go into care at some point in the future your Local Authority may try to argue that there has been a deliberate “deprivation of assets” for the purpose of avoiding care costs by having put your home into a trust.  If successful with this argument it would entitle the Local Authority to carry out their financial assessment as if you still owned your home. There are no definite time limits (the 7 year period that you may have heard people mention is only of relevance for IHT purposes) but (a) the longer the time between setting up the Home Protection Trust and going into residential care, (b) the better your health at the time of setting up the trust, and (c) other reasons you can show for setting up the trust, the less likely it is that the Local Authority would try to argue that the transfer was a deliberate deprivation.

  • As the transfer is to a trust and not direct to children or other family members, you retain control and avoid many of the risks otherwise associated with transfers direct to family.  Whilst the whole family may be close at this time none of us has a crystal ball and there are potential dangers in transferring property to individuals who may at some point in the future become vulnerable. Even a child with a secure job and marriage could get into financial difficulties or separate/divorce. These potential problems are avoided with the Home Protection Trust.
  •  You ensure your home will pass to those you wish to benefit at the time selected by you, for example when you die. On death the home can be quickly transferred by the remaining trustees, in accordance with your wishes, without waiting for Confirmation of executors by the court.
  • Indeed it may save the family legal costs and court dues at the time of your death.

 Detailed advice

Whilst this scheme can have significant benefits and protections for you and your family, it should only be entered into after a full appraisal of all your circumstances to ensure it is the best solution for you.  A member of our ARCS team will assess your circumstances and provide you with the detailed and impartial advice that you need to make an informed choice as to whether a Home Protection Trust is right for you.  .  The final decision should be based on many different factors on which we are in a position to advise you, impartially and in your best interest.

Care costs are, however, becoming a major worry for many families, principally because these costs have escalated considerably over recent years.  Statistically in the UK 1 in 3 women and 1 in 4 men will spend some time in full time care.  Unless you have an excellent pension most people are unable to fund the cost of their care through income alone and their capital can be quickly eroded.  Often the family home is the main asset and unfortunately an increasing number of houses are sold in the UK each year to pay for accommodation and care costs.  Whilst we cannot give you a cast iron guarantee that your home will not need to be sold if you put it into a Home Protection Trust (no one knows what changes to the law there might be in the future) we can guarantee that it is less likely to have to be sold than if you do nothing!