A Home protection trust is a lifetime trust which is set up during your lifetime. Once the Trust deed is signed the home is 'ring fenced' immediately, protecting the home from lifetime attacks.
Placing a property within a trust protects it from 'sideways disinheritance' , claims upon the divorce or bankruptcy of a beneficiary and can save Inheritance Tax on a beneficiary's estate by retaining assets within the trust and passing them directly to future generations. Further, probate fees can be mitigated or avoided as the property within the trust is not part of the estate for distribution or probate purposes. This also means they are protected from any claim under the Inheritance Family Provisions legislation
A couple can transfer the family home into a trust and continue to live there for the rest of their lives. The death of the first spouse to die will not affect the right of the surviving spouse to occupy the home. The equity of a property which is subject to a mortgage can be placed within a trust and secured by a restriction on the land registry title without needing the consent of the lender.
Taxation:- The purpose of the trust is not to mitigate or avoid inheritance tax but to protect and preserve assets. It is Inheritance Tax Neutral in this respect and does not remove the value of the property from the Inheritance Tax Calculation on death if the settlors continue to receive a benefit from the asset. The principal residence exemption for Capital Gains Tax will continue to apply to a property held in principal residence.
Care Fees:- Clients often ask whether Home Protection Trusts can protect against care home fees. The fear is that the family home will be taken from them and sold so that nothing is left for future generations. This is a complicated topic and involves consideration of the concept of 'deliberate deprivation'. Any act carried out whereby assets are transferred, sold or used up deliberately to diminish the settlor's assets to avoid paying care fees can be considered as delberate deprivation. If assets are transferred into a trust into an Home Protection Trust whilst care fees are not even contemplated and when the clients are healthy and not considering going into care, the assets may be excluded from a local authority assessment for care fees. A full assessment of the settlors' circumstances will be required to provide full and accurate advice in this respect. Please contact us to discuss in detail.
The cost for a single person is £1,200 couple £1,500 including vat. (Normal Market Cost £2,000-£2,500) This includes the severance of tenancy if required.