Family Protection Trust - Avoiding Care Home Fees

by **andyk74** on Mon Feb 07, 2011 3:21 pm

Hi,

I have heard that one way of avoiding possible care home fees in the future is to place some or all assets into a "Family Protection Trust"

Can anyone advise as to whether these are a good thing or not? Considering putting house into the trust - myself as trustee and also making it "revocable?"

House is valued at £190,000 - what are any taxation issues?

any advice would be welcome

thanks

by **tax_schmax** on Tue Feb 08, 2011 4:54 pm

Technically, if you no longer own the house, it cannot be taken into account as an asset of yours when being assessed for your level of contribution towards your cost of care. Giving the property to a trust fund would IHT may not be an issue if your estate is small, Capital Gains Tax would be chargeable when the property were sold and I think there might be a need to account for rent. i.e. pay income tax on the value of rent the trustees should demand from the property being occupied. If the property was occupied once you were in care, there would be income tax to pay on the actual rent being received. Discretionary trusts are effectively higher rate taxpayers.

If you are deemed to deliberately deprive the local authority of capital, they can treat it as though the deprivation never happened. Also, if the trustees of a discretionary trust don't have discretion, the trust could be deemed as not being there and therefore negating all planned effects.

If it were easy, everyone would be doing it. (and then the rules would change again!!)

by **MeldrewsGuru** on Thu Apr 07, 2011 3:47 am

This doesn't answer the question which was about Family Protection Trusts not Discretionary Trusts. They are totally different.

by **pqtaxation** on Thu Apr 07, 2011 1:35 pm

MeldrewsGuru wrote:This doesn't answer the question which was about Family Protection Trusts not Discretionary Trusts. They are totally different.

Hi Guru

So why don't you live up yo your name and please tell us about Family Protection Trusts, as the OP asked, if you know the answer?

by **section 44** on Thu Apr 07, 2011 4:22 pm

andyk74 wrote:myself as trustee

Who would be the beneficiary - you? Doesn't sound much like a trust if you are settlor, trustee and beneficiary.

The point with care home fees is that local authorities don't, when assessing a person's capital, take into account a person's life interest in assets. If, for example, you transferred your home to another person to hold on trust for you for life then whilst you may be entitled to use the home it would not be your capital.

by **kamywill** on Mon May 02, 2011 8:43 am

Yes why not, it is a good thing.By this you are doing great work.

by **maths** on Mon May 02, 2011 8:31 pm

The term "family protection trust" is meaningless in both legal and tax terms; protection trusts are defined in TA 1925 s 33 but such are irrelevant for present purposes.

Care homes are of course concerned to investigate deprivation of capital. Transferring property into trust many years ahead of any possibility of going into a care home will not fall to be regarded as deprivation of capital; doing this when elderly and perhaps in ill health would be construed as such.

Thus, for example, if you are elderly and perhaps anticipate that in the next, say, 5 years you anticipate going into a home so you transfer your property into trust under which you are granted an interest in possession this would be perceived as deprivation of capital and thus from the care home perspective pointless.

Transferring property into trust and continuing to live in it constitutes a gift with reservation for IHT purposes.