Worried about the potential impact of care home fees on your family’s inheritance? A Property Protection Trust (sometimes called a Family Home Trust) is a legal tool that can help safeguard your property for your loved ones. However, it’s a complex area, and it’s essential to understand how these trusts work and seek professional legal advice before making any decisions.
What is a Property Protection Trust?
A Property Protection Trust is a type of trust specifically designed to protect your home from being assessed for care home fees. It involves transferring ownership of your property into a trust while you’re still alive. You (and/or your partner) typically continue to live in the property and can even retain some control over it.
How does it work?
- Creation of the Trust: A legal document establishes the trust, outlining its terms and appointing trustees, this is usually within your Will.
- Transfer of Ownership: You transfer ownership of your property to the trustees.
- Beneficiaries: The trust document names the beneficiaries, who are the people you want to inherit the property (usually your children or other family members).
- Occupation and Control: You can often continue to live in the property and may even have the right to sell it and buy another property within the trust. This is often achieved through a “life interest” or similar mechanism.
- Care Home Assessment: If you need long-term care, the local authority will assess your assets. Because the property is now owned by the trust, it may not be considered part of your assessable assets, depending on the specific terms of the trust and your individual circumstances.
- Inheritance: Upon your death (or the death of the surviving partner, if applicable), the property passes to the beneficiaries according to the terms of the trust, potentially protected from care home fees.
Important Considerations:
- Not a Guaranteed Solution: While a Property Protection Trust can be an effective tool, it’s not a guaranteed way to avoid all care home fees. Local authorities can challenge trusts if they believe they were set up primarily to avoid paying fees. They will look at the timing of the trust creation, your health at the time, and other factors.
- Five-Year Rule: There’s a common misconception about a “seven-year rule.” While gifting assets outright can be challenged if done shortly before needing care, the relevant period for trusts is generally considered to be closer to five years, but this is not a hard and fast rule and it is crucial to seek legal advice on this. The longer the time between creating the trust and needing care, the stronger the argument for its validity.
- Deprivation of Assets: Local authorities can argue that transferring your property into a trust was a “deliberate deprivation of assets” to avoid care fees. This is why proper legal advice is crucial to ensure the trust is structured correctly.
- Control and Flexibility: Careful consideration must be given to the level of control you retain over the property after it’s placed in the trust. You might want to be able to sell the property or move to a different home. The trust document needs to be drafted to reflect your wishes.
- Costs: Setting up a Property Protection Trust involves legal fees. These costs are an investment in protecting your assets, but it’s important to be aware of them.
- Tax Implications: There may be tax implications associated with setting up a trust. Professional advice will help you understand these.
Who Needs a Property Protection Trust?
A Property Protection Trust may be suitable for individuals or couples who:
- Own their home.
- Are concerned about the potential cost of future care.
- Want to preserve their property for their family.
Professional Advice is Essential
Property Protection Trusts are complex legal instruments. It is absolutely vital to seek professional legal advice from one of our specialists. They can assess your individual circumstances, explain the implications of setting up a trust, and ensure the trust document is drafted correctly to meet your needs and comply with the law. Do not attempt to create a trust without legal guidance.
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The content on this page is for general knowledge purposes only and does not constitute legal advice.