Putting a house in trust (Scotland) to avoid care costs

I have no direct knowledge of how the law in Scotland varies from the law in England on this matter, but Social Security law is universal for the whole of the UK and that states that if you dispose of any assets, including your house, by either giving it to your children or putting it in trust, or any other way with the express purpose of avoiding paying for care the local authority retain the legal right to challenge these disposals, and potentially grab these funds. If you want to avoid this you need to put your house in trust probably in middle life, and have good provable reasons for doing this.

As well as this if you put your house in a trust or give it to your children you will be expected to pay the market rent for it into the trust. It is not possible to continue to live in your house rent free or for a peppercorn rent after you have put it into a trust. Otherwise it will again be assumed that you did this to avoid care costs and the local authority will act as if you still own the property.

This last requirement to pay rent also applies if you have put your house in a trust or given it to your children in order to avoid inheritance tax. I once was involved with trying to help someone who had done this in his 70s with an expensive house and then lived until his late 90s. The value of the house - and its rental value had shot up and it reached a point where the market rent exceeded his full retirement income from all sources. Because of what he had done and when he was not entitled to housing benefit

The fact that the trust is being set up entirely legally by a reputable solicitor does not necessarily mean that it gives the protection you require and the cost of £4,000 sounds quite excessive for undertaking what is essentially quite a simple piece of legal work. Having set up a trust when DH and I made our wills about 5 years ago, the total cost of making the wills and setting up the trust was just over £500.

Yes the amount of charges does seem excessive how much commission is the financial advisor earning on the deal, an amount I would like to find out if he was working in my interests.

My limited knowledge of Trusts is that timing is all, if you don't do it early enough then its not going to work. Also the Tax position with Trusts is complex and seems to go on forever. WE are still settling tax bills for a Trust set up to provide for SIL (she could not be trusted to have her share of the father's estate outright - long story). So the Trust will still be around for years and every year the taxman takes a chunk, there are often fees incurred by whoever manages the trust also.
I do think you need to get lots of advise from more than one set of professionals - someone with less of an interest perhaps. As FlicketyB says just because a reputatble solicitor sets it up there is still provision in law for you to fully understand all aspects of it. You cant just set it up and expect it to be sorted.

I don't know land law in Scotland but FlicketyB is correct in saying that if you dispose of your assets to keeping it from being sold to fund care costs it can be challenged by the Local Authority.
My parents split the ownership of their house in to Tenants in Common ownership which meant when my mother passed away her half became mine and Dad owned his half.
This would have meant that if Dad had gone in to care only half of the house would have been available to pay for his care.
As it happened I went to live with my father and as I was an owner occupier none of the house could have been taken if he needed care.
I would warn you that you do have to stand firm against the council as I think Social Workers are instructed to say the house would have to be sold in that situation and they then have to back down if they come up against somebody who knows the law.

Frank

The cost covers the fees for going to court should the local authority dispute the facts of the trust and they have never lost a case. It also covers all ongoing costs of the trust itself so no matter how much work it entails for them they do not charge again. It also just about halves the cost of winding up an estate as this part of the estate is not counted and this would be twice over . I realise the solicitors and the financial advisor get a cut but hey nothing is free . They also sort out deeds of attorney and any changes to you will you might want. I was impressed by the financial advisor as he did not see a lot of changes that need to be made to our holdings . This is in sharp contrast to the one we had yesterday from Towry who was tutting over different things and would have changed them . The second chap really plugged funeral plans which I shot down at once as they are not a good idea unless you want to reduce the amount of your estate. I have mine planned and it will not cost much. Even if it did there will be plenty to cover it.
I had an aunt who always said she was glad she had no money as it was such a worry. I know from family experience that one relative went through the entire worth of the estate in fees for a home .

The cost covers the fees for going to court should the local authority dispute the facts of the trust and they have never lost a case. It also covers all ongoing costs of the trust itself so no matter how much work it entails for them they do not charge again. It also just about halves the cost of winding up an estate as this part of the estate is not counted and this would be twice over . I realise the solicitors and the financial advisor get a cut but hey nothing is free . They also sort out deeds of attorney and any changes to you will you might want. I was impressed by the financial advisor as he did not see a lot of changes that need to be made to our holdings . This is in sharp contrast to the one we had yesterday from Towry who was tutting over different things and would have changed them . The second chap really plugged funeral plans which I shot down at once as they are not a good idea unless you want to reduce the amount of your estate. I have mine planned and it will not cost much. Even if it did there will be plenty to cover it.
I had an aunt who always said she was glad she had no money as it was such a worry. I know from family experience that one relative went through the entire worth of the estate in fees for a home .

FlicketyB is wrong in her assumption that putting the house in trust means we no longer own it. We will be trustees of the trust and there is no change in ownership or rent to be paid .You can sell the house or anything you want to do with it.
Watch this space I will let you know how it goes . I mean to go to the Citizens Advice people to discuss the ramifications with them.

This is a PPS , the trust is called a Family Protection Trust see
http://familyprotectiontrustscotland.co.uk/

Going to the CAB seems to be a very good idea!

I still think this is a very dodgy arrangement and one that, personally, I would not be prepared to risk.

Yes it does Lilygran - as with all financial arrangements that are 'sold' you really need to understand them and not take anything on trust. Everyone is trying to make some money out of such things and this over complicates matters. Not saying anyone is being devious, it just seems to make things so much more complicated. Yesterday I had to update a savings account at the bank - years ago (when I was a bank clerk) it would have been a quick 5 min job. 'Yes, Mrs B- a new savings account - sign here - thanks'. But now its 40 mins of sales talk and lots of 'we are legally obliged to say such and such' before they let you do anything definately.

Eleanorre, I have been out this afternoon and thinking about your plan while I was out. Now I have come back and re read your posts I have come to the conclusion that you do not fully understand how a trust works.

When your house is put in trust, the ownership of the house passes from you to the trust. The fact that you are the trustees does NOT mean that you therfore own the assets of the trust. Property, whether a house or other assets, goes into a trust for the benefit of specific beneficiaries, I would assume your children/grandchildren etc. As trustees you have a legal responsibility to manage these assets, that are no longer yours, for the benefit of the beneficiaries. This means that, if the assets of the trust include a house the house should be properly maintained and managed and unless there was other legally sufficient reason it should be let at a market rent. If you choose to live in it you must pay rent and that rent goes, not to you but to the Trust.

Do not be misled into thinking that just because your solicitors are 'reputable' and your financial advisor likewise that they will not be pulling a fast one on you. Royal Bank of Scotland and Bank of Scotland were considered exceptionally reputable Banks, but they are having to pay billions of £s back to peopel who were missold PPI insurance, endowment policies and all sorts of other schemes that were not what their customers thought they were.

Before tieing your self up in this scheme seek legal advise from another solicitor or speak to your local CAB. If this scheme could put people's assets out of play for any care fees they may need to pay every older house owner in the country would have set one up - but they havent, because they do not work and can be overturned by local authorities, who will usually just refuse to pay care fees rather than go to all the bother of a court case.

The fact that you posted details of this scheme on Gransnet for comment shows that underneath you too are uneasy about it.

FlickertyB the costs of £4.000 in respect of fee's would not cover court costs indefinatley as stated by the op if the Authority concerned took the case to court re funding of care do you not agree ? I would be very concerned about this and take further advice because as you say if this was acceptable every other home owner of pensionable age would be doing the same thing.

Glammanana, I think the whole thing is distinctly dubious from start to finish.

You are not understanding how this trust works FlicketyB if you research it you will see that the house in in trust for us there is no question of it being in trust for anyone else or having to pay rent. At any time you can remove it from the trust or remove whatever money you put in as well. I spoke to the CAB to-day and they could find no fault with the idea. They agree with me that is it possible the government or local authority will change the rules on trusts and it might not be safe from care home fees but our family would pay a lot less to the lawyer who winds up our estate as the money and property in the trust are not counted. I know there is a sliding scale on the fees depending on the amount of the estate and you can pay a lot. I used to work in banking so know about these things.

Hi Eleanorre I am a semi-retired lawyer and have just come across these posts. I realise that these messages were posted a few months ago so hope that I am not too late. Recently I ahve been offered a job with a company that works in this field and that purports to provide such trusts and have been researching this area. Believe me these companies do not know what they are doing and the trusts offered will not have the effect that they (or you their client) believe. Although it may seem like a good idea I urge you to listen to FlicketyB. The procedure that would be required for such a trust to be effective is far more complex than it appears you have been advised.

I think I posted on this subject a few weeks ago; but I will repeat it as it is relevant to this thread.
I spoke to a lawyer at the Which organisation a few weeks ago on this subject. She was very honest in that she said: nobody really knows what is happening in this area as the rules are changing all the time.

www.careinfoscotland.co.uk/how-do-i-pay-for-care/paying-care-home-fees/deprivation-of-capital.aspx

This link may be of some use.

Frank

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