Beware of the scams: Property Protection & Lifetime Trusts

‘Should I give my property to my children?’ or ‘Should I put my property into trust to avoid tax or care fees?’ are both questions we are frequently asked by clients.

Words by Claudia Roberts

With the growing cost of care fees (£30,000 to £40,000 per annum) and Inheritance Tax charged at a whopping 40%, it is not surprising most of us are keen to protect our hard-earned assets to make sure we can pass at least something onto the next generation.

The ‘fear’ of losing everything to fund care or large tax liabilities for children is used as a marketing tool by unscrupulous companies to ‘sell’ what are often referred to as ‘Property Protection’ or ‘Lifetime Trusts’. This service usually comes with a big price tag of around £3,000 to £5,000. Worryingly, these companies are generally UK registered and often claim to have some legal or other qualifications.
The scheme ‘sold’ to you encourages you set up a trust during your lifetime and then transfer your home to the trust to benefit you while you are alive.

It is claimed that, as you technically no longer own the house (but the trust does so for you), the local authority can no longer get at this to fund future care. It is often claimed to have other benefits, such as avoiding the need for probate, reducing Inheritance Tax and the like.

Unfortunately, the claims are false. The local authority can use the ‘deprivation of asset’ rules to challenge the transfer of the property to the trust and continue to treat it as if it was yours for assessing the need to pay for any care. Also, unless you pay market-value rent to stay in your home, the property still will be part of your taxable estate for Inheritance Tax. In some cases, it could still be taxed and lead to the loss of your new Residence Rate allowance which would increase – rather than decrease – the tax due.

There are other far more effective and cheaper ways of protecting assets from care fees and to minimise taxes payable on death. The best starting point is a solicitor-prepared Will. The Private Client Team at Glanvilles specialises in protecting our clients’ assets in the most efficient ways.

For an initial no obligation consultation please contact Claudia Roberts on (01983) 527878 or email
[email protected] who will be able to discuss your options with you.

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