Home Protection Trust

Many people, especially the elderly, share concerns over the loss of control of their assets and there are frequent examples in the national press of persons being robbed of their wealth by unscrupulous schemes designed to prey on the unwary and the vulnerable. The cost of care is also a serious issue. Every year thousands of people are forced to sell their home to pay for residential care, which often leaves little to pass on to children and grandchildren.

For anyone with total assets in excess of the current threshold of £23,250 the cost of their care has to be met by them. Care isn’t cheap and can easily swallow all the equity in even a substantial estate so there is little remaining to be left to your family and other loved ones. Even if the Government’s latest proposals for care home funding are approved in full (after the next election) people’s houses and their legacies will still be at risk since the proposed cap doesn’t include the “board & lodging” element of fees which can be two thirds of the total cost.

What is the Home Protection Trust?

The Home Protection Trust

The Home Protection Trust is designed for home-owners (either an individual or a couple) and involves the transfer of your home into the trust held jointly by the Trustees (usually you and your children). This can offer substantial benefits with no loss of control or flexibility

How Does It Work?

Under the terms of the trust you, as the person creating the trust (the Donor) are also a beneficiary so that, once the trust is created, you may continue to live in your home for the rest of your life or until you decide that residence is no longer required.

Despite the fact that the trust now owns your home you still retain the benefits and flexibility of home ownership. For example, if in the future, you wish to move to a smaller property you retain all rights of residence in the new property.

The key point to emphasise is that on a day to day basis nothing has really changed – but with the property held securely by the Trustees you have the peace of mind in knowing that you have done everything you can to prevent being illegally deprived of your property and to reduce substantially costs to your estate whilst alive and after your death.

Establishing a Home Protection Trust effectively places a protective ‘wrapper’ around assets thereby ‘ring fencing’ them for your children and other nominated beneficiaries.

What are the Benefits?

The principal benefits of establishing the Home Protection Trust include:

  • Substantial savings in probate fees. These can be of the order of 4% to 7% but even at the lower level, with a house worth £300,000 your estate would save £14,400 in probate fees alone by using the trust. Without a trust these fees would have to be found (or borrowed) by your dependants before the estate could be distributed …… do they have that sort of money?
  • As a Trustee, you will remain in control of your property
  • Avoiding delays in dealing with the estate on your death as the surviving trustees can proceed immediately with the paperwork
  • Can prove beneficial by ‘ring fencing’ assets from potential bankruptcy issues.
  • Trust assets can be held for individuals who cannot hold them for themselves – for example minor children or disabled persons.
  • Protect your assets from the survivor remarrying.
  • As a bonus, it may avoid the value of your home being included in a local authority means test for residential or domiciliary care – * see the quotation from the Law Society below.

Although not all of the above reasons will apply to every individual the impact of just one or two of them may be sufficient justification to proceed.

Key Facts about the Home Protection Trust

The Home Protection Trust is designed for individuals who wish to continue living in their home for the rest of their lives but are concerned about how their property, or its proceeds of sale, will be used on their death.

Before establishing the Home Protection Trust there are a number of issues that we recommend you consider:

  1. Individual circumstances vary a great deal and it is impossible to state categorically whether this, or any other method of estate planning, is best for you without carrying out a thorough review of your affairs.
  2. You should always discuss your plans with your immediate family on whom this will have the greatest impact, i.e. the beneficiary(ies) of your estate.
  3. If, having moved into care, it is found that you have deliberately deprived yourself of resources (including your home) you can be considered as still having those resources and the local authority will calculate your entitlement accordingly. The timing of the disposal of an asset has to be taken into account and whilst there are no hard and fast rules, the longer the period between the transfer of the property to the trust and the need for care, the lower the likelihood that ‘deliberate deprivation’ can be proved.
  4. Of course, you could simply give your home to members of your family without the use of a trust.

However we strongly recommend that you do not do this because:

  • Once you have given your home away it is no longer yours and you lose control over it.
  • If the recipient was your son or daughter and they were to divorce, or die before you or become bankrupt, the security of your home would be threatened.
  • The new owners could pressure you into entering residential care sooner than you thought necessary or would have wanted to.

All these pitfalls can be avoided by use of the Home Protection Trust.

The Next Step

If you are concerned about the effect that having to meet the cost of residential or domiciliary care or the impact it may have on your estate, and what you are able to leave to your family, you may wish to consider the benefits available through the Home Protection Trust. Time is of the essence when it comes to care charges and it is essential that the Home Protection Trusts is set up as early as possible.

If you would like to know more about the Home Protection Trust or any other products available from Lancashire Bespoke Wills please contact us on 01704 548626 / 07813 880030 or email ianspencer@lancashirewills.co.uk