100,000 homes sold to fund care
In the last five years??? over 100,000 people have sold their property to fund domiciliary care. The Will & Trust Company can help you avoid this dilemma.
Asset Protection Trust
For most people, ownership of their own property does not always mean they are wealthy, in the sense of having cash to spend. Even in an environment of rapidly increasing property values, home ownership for most of us is usually more about practical issues, such as a place to live, somewhere to host friends, or a legacy for children or grandchildren.
In practice, there may be a number of reasons why the use of a trust in respect of our home may offer valuable benefits. After all, most of us would like the option to ensure the home we have paid for over the years passes to our family or friends when we no longer have a need for it.
The Will & Trust Company Asset Protection Trust is designed for homeowners, usually living on their own (i.e. no children still living at home), and involves the transfer of your home to the trustees of a trust. Under the terms of the trust, you as the person creating the trust (the settlor) are also a beneficiary, so that once the trust is created, you may continue to live in your house for the rest of your life rent-free, or until you decide that continued residence is no longer required or appropriate.
How does it work?
The following diagram illustrates the simplicity of the Asset Protection Trust.
Despite the fact that the trust now owns your home, you still have a good deal of flexibility. For example, if in the future you wish to move to a smaller property, you retain the right of residence in the new property and have access to any excess funds, via a Trust bank account, to augment your income.
What are the benefits?
The principal benefits of establishing an Asset Protection Trust include:
- By making a gift into the trust, control of your home rests with the trustees, one of whom is usually you. You also ensure that it will pass to those individuals you wish to benefit at the time selected by you – for example, when you die.
- To speed up the administration of your estate and avoid the costs that can be associated with Probate.
- To enable your home to be held for individuals who cannot hold it for themselves – for example, children or disabled persons.
- The ability to protect the value of your home from spendthrifts or to keep ownership of the property private or secret.
- To protect the property should one of your children experience a breakdown in their relationship.
- It may avoid the value of your home being included in a Local Authority means-test for residential or domiciliary care purposes.
To ‘generation skip’, which can be a useful way of avoiding Inheritance Taxes for your children.
Although not all of these reasons will apply in every case, the impact of just one or two may be sufficient reason to proceed.
Prior to establishing the Asset Protection Trust there are a number of issues we recommend you consider:
a) Individual circumstances vary a great deal and it is impossible to state categorically that this, or any other method of Estate Planning, is best for you without carrying out a thorough review of your affairs.
b) It may be advisable to discuss your plans with those members of your immediate family who would derive the greatest benefit from the arrangement. i.e. the beneficiary(ies) of your estate.
c) If you need long-term care and you have previously placed your home in trust, the right of residence will usually be replaced by the right to receive an income. This income will be allocated towards the cost of care, although the capital value of the property will usually be disregarded.
d) If, having moved into care, it can be proven that you have deliberately deprived yourself of resources (including your home) solely for the purpose of avoiding long term care you can be considered as still having those resources and the local authority will calculate your entitlement accordingly. This could include the setting up of an Asset Protection Trust.
The timing of the disposal of the asset must be taken into account. While there are no hard and fast rules, the longer the period between the gift and the need for care, the lower the likelihood that “deliberate deprivation” can be proven.
e) Of course, you could simply give your home to members of your family without the use of a trust. However, we strongly recommend against doing this because:
– Once you have given your home away, it is no longer yours and you lose all control over it. What if the recipient was your son or daughter and they were to divorce, become bankrupt or die before you?
– The new owners could pressure you into entering residential care sooner than you thought necessary or might want to.
Both of these pitfalls can be avoided by use of the Asset Protection Trust.
f) There are some local authority grants for repairs/maintenance to your home that, if you proceeded with the Asset Protection Trust, you would no longer be eligible for. These are mainly concerned with making improvements to enable an infirm or disabled person to continue living in their home.
g) Finally, should you be aiming to release equity from your home in your later years, the presence of an Asset Protection Trust would make the application a little more complex than if the Trust were not in place.
The next step
If you are concerned about the effect that having to meet the cost of residential or domiciliary care will have on the amount of money that you leave to your family and friends, you may wish to consider the benefits available through the Asset Protection Trust.
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