Protecting Your Home From Care Fees Using Trusts

Lately, we’ve been receiving a lot of inquiries about protecting your home from care fees using trusts. While trusts can be an incredibly effective tool in estate planning, it’s important to understand that they are not a one-size-fits-all solution. This post will explain why trusts are beneficial, the different types of trusts available, and why they should be part of a broader estate planning strategy rather than being set up solely to avoid care fees.

Can Trusts Protect Your Home From Care Fees?

Yes, protecting your home from care fees using trusts can be affective, but it’s essential to note that if a trust is established solely to avoid care fees, it may be considered deliberate deprivation of assets. This could lead to the trust being disregarded during a financial assessment for care funding. Therefore, it’s crucial that trusts are set up with multiple objectives and benefits in mind, not just to shield your home from care fees.

The Different Types of Trusts

Understanding the various types of trusts available is key to making informed decisions about estate planning:

Will Trusts: These trusts are created through your will and only come into effect after your death. They can be used to ensure your assets are distributed according to your wishes while offering protection for your loved ones.
Living Trusts: These are set up during your lifetime and can help manage your assets while providing a degree of protection. They’re often used for asset management or to reduce probate stress.
Death Trusts: Similar to will trusts, these come into effect upon your death but can include additional provisions to address specific needs, such as inheritance tax planning or protecting assets for future generations.

Each type of trust serves different purposes and can be tailored to your individual needs and goals.

Trusts as Part of a Holistic Estate Plan

While trusts are a powerful tool, they are most effective when used alongside other estate planning strategies. For example:

Inheritance Tax Planning: Trusts can help reduce the amount of inheritance tax your loved ones may need to pay.
Bloodline Protection: Trusts can ensure your assets are passed down securely to your children or grandchildren, protecting them from risks such as divorce or creditors.
Reducing Probate Stress: Trusts can simplify the distribution of your estate, reducing the stress and time involved in probate.

By setting up a trust with these additional benefits, you ensure that the trust serves broader purposes, making it less likely to be deemed deliberate deprivation of assets.

Timing Is Everything

To maximize the benefits of protecting your home from care fees using trusts, it’s important to establish it at the right time. Setting up a trust before the need for care arises or before reaching the age of 80 is crucial. This allows you to benefit from the long-term advantages of the trust while ensuring it is established with genuine intent and not solely to avoid care fees. Slightly over the age of 80 may still be effective if it is a married, or cohabiting couple setting up the trust.

Tailored Advice for Your Situation

Every individual’s situation is unique, which is why trusts and estate planning tools need to be tailored to your specific needs. Consulting with an experienced estate planner can help you explore all your options and create a plan that offers the best protection for your home and assets.

Trusts can only protect a certain amount of a residential property from care fees. If you have multiple properties or your home is worth millions, then a trust alone will not protect your estate from care fees. Later Living Helpline have reached out to estate planners across the country, and some have offered free online advice to provide specific guidance regarding personal estates. They can let you know if a trust would work for you, how to set it up, and what is involved cost-wise. This is crucial as some people have set up trusts that simply will not work the way they intended. If a trust is not suitable for your situation, they will tell you, so you know what is and isn’t an option for you. The advice is free, and it’s better to have the information now and not need it than to need it later and not have it.

For more information on how care fees work, read the Adult social care charging reform on the governments website.