It's strange that the solicitor put the suggestion of the trust in writing, normally he is so careful. I think perhaps because the Will created the trust then the LA cannot complain, the trust was designed to 'avoid' inheritance tax (quite legal) but as an inadvertent consequence of the trust it would also make the assets in the trust exempt from LA means-testing. The trust was not designed originally to deprive mum of assets.
Avoiding (some of) the care home costs!
- Thread starter oilovlam
- Start date
It's strange that the solicitor put the suggestion of the trust in writing, normally he is so careful. I think perhaps because the Will created the trust then the LA cannot complain, the trust was designed to 'avoid' inheritance tax (quite legal) but as an inadvertent consequence of the trust it would also make the assets in the trust exempt from LA means-testing. The trust was not designed originally to deprive mum of assets.
If the LA decide that a half share of the house has a value of half that of whole house your Mum will be over the upper limit and the LA will not fund.
I doubt if they could set up a DPA secured on the half share of the house, where is the cash to pay for care going to come from?
When doing your calculations think about.
Annual % increase in self funding fees - norm appears to be between 5% and 10%
Annual % rise in LA funding - more like 2% to 3%
Annual increment in any pension - the LA just absorb this.
I doubt if they could set up a DPA secured on the half share of the house, where is the cash to pay for care going to come from?
When doing your calculations think about.
Annual % increase in self funding fees - norm appears to be between 5% and 10%
Annual % rise in LA funding - more like 2% to 3%
Annual increment in any pension - the LA just absorb this.
When we rewrote our wills a couple of years ago, we set up a clause to say what would happen to the grandchildren's inheritance if their parent (i.e. our children) pre-deceased us. The money will be kept in trust until they reach a certain age - but we named the trustees in our will, and I don't understand why this doesn't seem to be the case in your dad's will too. In what capacity are you dealing with this now? As a trustee? As an executor?
Posts #9 and 10 suggest the circumstances are that the trust is already set up. Is that not the case?
I dont really understand why there is a question about deprivation of assets. The house was owned as tenants in common, I assume well before any issue about dementia came about and therefore the father's half is his to leave as he wishes in his will. He is not depriving his wife of any assets, as she did not own his half of the house in the first place. The trust ensures that his widow will not have to sell her home and ensures funds will be available in her lifetime for the maintenance of that home, if necessary, but also that upon her death any remaining funds willl go to his beneficiaries. If they are the terms of the will, I dont see how they can be overturned, unless it is with a deed of variation.
The LA would have no need to investigate initially, as there would be the wife's half of the house to start her off as a self funder, and as her pensions, and top rate attendance allowance would go towards the fees, it might last a bit longer. I think there is also a 12 week period where fees dont have to be paid to allow time to sell the house.
When my mother went into care as a self funder, there were things called deferred annuity plans which guaranteed care home fees after a certain amount of time. I dont know if they still exist, as interest rates are so low, sothey are likely to be even more expensive, but after my mother had been in care for 2 years, we calculated how long the capital would last and decided to take one out deferred for 3 years, for peace of mind, knowing that if she lived a long time the care home fees would be paid. As it happened she died a year after we took it out - it was a gamble and it cost a lot of money, which could not be reclaimed, but it gave us peace of mind.
The LA would have no need to investigate initially, as there would be the wife's half of the house to start her off as a self funder, and as her pensions, and top rate attendance allowance would go towards the fees, it might last a bit longer. I think there is also a 12 week period where fees dont have to be paid to allow time to sell the house.
When my mother went into care as a self funder, there were things called deferred annuity plans which guaranteed care home fees after a certain amount of time. I dont know if they still exist, as interest rates are so low, sothey are likely to be even more expensive, but after my mother had been in care for 2 years, we calculated how long the capital would last and decided to take one out deferred for 3 years, for peace of mind, knowing that if she lived a long time the care home fees would be paid. As it happened she died a year after we took it out - it was a gamble and it cost a lot of money, which could not be reclaimed, but it gave us peace of mind.
The legal position seems to have been lost in the posts:
a) if the will states that half the house goes into a trust, then that is what happened legally on the death of OPs father, there is no option, it happened
b) the will should name the trustees, if it doesn't I think by default that the executors are the trustees so there is no need or indeed option to find trustees, they exist already
Neither of these are options, they are what has happened, without a deed of variation to the will (for which you really do need to pay a solicitor) they cannot be reversed.
c) the letter of wishes has no legal validity, it is just that wishes, as the trust is discretionary so that it doesn't form part of mum's estate for IHT
d)as the trust is discretionary, legally the assets are under the control of the trustees in their role as trustee, ie they have to act in the interests of the trust
Oilovlam refers to 'free' advice from the solicitor - I presume this means she has not been to the original solicitor that drafted the wills, but a new one. If it was a free hours meeting then no formal advice will have been given, even if a letter was sent as the solicitor won't be covered by their insurance to do this. Therefore I think the confusion may arise as the solicitor will only have talked in general terms, not specific terms.
Frankly CAB will not be likely to understand this area of the law, and you do need to pay for good advice if you aren't to get yourself in a right muddle that will cost more later.
This form of trust planning was very very routine for decades until the change in the IHT limit being passed to the spouse so any decent solicitor should be very familiar with it.
a) if the will states that half the house goes into a trust, then that is what happened legally on the death of OPs father, there is no option, it happened
b) the will should name the trustees, if it doesn't I think by default that the executors are the trustees so there is no need or indeed option to find trustees, they exist already
Neither of these are options, they are what has happened, without a deed of variation to the will (for which you really do need to pay a solicitor) they cannot be reversed.
c) the letter of wishes has no legal validity, it is just that wishes, as the trust is discretionary so that it doesn't form part of mum's estate for IHT
d)as the trust is discretionary, legally the assets are under the control of the trustees in their role as trustee, ie they have to act in the interests of the trust
Oilovlam refers to 'free' advice from the solicitor - I presume this means she has not been to the original solicitor that drafted the wills, but a new one. If it was a free hours meeting then no formal advice will have been given, even if a letter was sent as the solicitor won't be covered by their insurance to do this. Therefore I think the confusion may arise as the solicitor will only have talked in general terms, not specific terms.
Frankly CAB will not be likely to understand this area of the law, and you do need to pay for good advice if you aren't to get yourself in a right muddle that will cost more later.
This form of trust planning was very very routine for decades until the change in the IHT limit being passed to the spouse so any decent solicitor should be very familiar with it.
So, in simple terms, (I've no legal brain) if that is the case, and it makes sense, are these the options:
- transfer the father's half of the house from the existing trust set up in his will directly to the mother? This will mean it will definitely be available for care fees if required
- transfer the father's half of the house from the existing trust set up in his will into a new trust, set up by the OP, under LPA, on behalf of her mother? Can you do that? An attorney can't write a new will. It would mean that the mother's new trust would need extra trustees as the OP is her mother's attorney. Is this where the confusion lies?
- Do nothing. Leave things as they stand (in the father's trust) and hope the trustees agree to abide by his letter of wishes
Are there other options?
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As I wrote before I don't know much about the difference between a trustee and an executor. The executors are named in the Will and I am one of them.
I think the Will mentions a 'discretionary trust' and I suppose that means that the trust exists (created by the existence of the Will??). I don't know much about the process of setting up a trust, I would probably rely on a solicitor to deal with the nitty gritty.
The original idea for the question was to find out whether the concept was a good one.
I have had some very helpful suggestions and realise that I have to find out a lot more before I commit.
JugglingMum, you are correct...again. The 'free' advice I am getting is from a different solicitor to the one that holds the Will. I was trying to get some comparison costs and I seem to be getting more & more confused.
The solicitor that drafted & has the original Will gave an estimation over the phone. The estimates were for handling the Will with Probate & without Probate. I don't really know what they wanted to do about the trust. When I did contact them again they said that I would need to pay for a consultation. Should they be providing more 'free' advice? Or do I have to start paying multiple solicitors to see what they think?
All I really want is a list of the options I can take, perhaps the pro's and con's of those options (although that may be too detailed to be free) and an estimate of the cost of those options. What level of service can I expect?
I think you are lucky to get any advice for free.
No idea what sort of sums you have been quoted, but to give you an idea
I gathered all the figures together to apply for probate.
Filled in the form.
lost my nerve! Big sums of money and a bungalow involved
Appoached my late parents solicitor ( same firm drew up the will, different partner)
Solicitor re-wrote the probate form, checked my calculations ( which were correct) and submitted the form.
They then forwarded me the grant of probate
Bill was C £1000
No idea what sort of sums you have been quoted, but to give you an idea
I gathered all the figures together to apply for probate.
Filled in the form.
lost my nerve! Big sums of money and a bungalow involved
Appoached my late parents solicitor ( same firm drew up the will, different partner)
Solicitor re-wrote the probate form, checked my calculations ( which were correct) and submitted the form.
They then forwarded me the grant of probate
Bill was C £1000
It is against forum T&Cs for members to post individual recommendations, they can however inform you by PM (Private Mail)
You could have a look on
http://www.sfe.legal/
and/or
http://societyoflaterlifeadvisers.co.uk/
to find specialists in you area.
You could have a look on
http://www.sfe.legal/
and/or
http://societyoflaterlifeadvisers.co.uk/
to find specialists in you area.
Discretionary trust?
I would advise you to go back to your solicitor and make him explain it better to you. That's his job and he won't mind. You do need to get it right. One mechanism often used in Wills is a Discretionary Trust of one half share of a house. Usually the surviving spouse is one of a list of beneficiaries but as the trust is discretionary, she /he has no absolute right to any part (or the whole of ) that trust. This means capital involved is disregarded for care assessment and there is no obligation to pay interest to the spouse (as this may count as assessable income). Discretionary trusts do work well when set up. You normally write a Letter of Wishes to give the trustees guidance on how to allocate funds and when and to whom. Your Dad would have done one of these alongside his actual Will. As I said though, go back to the solicitor for more advice. He will help you to figure it out safely.
I would advise you to go back to your solicitor and make him explain it better to you. That's his job and he won't mind. You do need to get it right. One mechanism often used in Wills is a Discretionary Trust of one half share of a house. Usually the surviving spouse is one of a list of beneficiaries but as the trust is discretionary, she /he has no absolute right to any part (or the whole of ) that trust. This means capital involved is disregarded for care assessment and there is no obligation to pay interest to the spouse (as this may count as assessable income). Discretionary trusts do work well when set up. You normally write a Letter of Wishes to give the trustees guidance on how to allocate funds and when and to whom. Your Dad would have done one of these alongside his actual Will. As I said though, go back to the solicitor for more advice. He will help you to figure it out safely.
Charges for consultation
If that solicitor tries to charge you for explaining either how he has drafted the Will OR how he will go about apply for Probate, that is extremely poor. In that case, you need an initial appointment with a new solicitor (if you tell them it's regarding a death and you have a Will, they will see you. Probate work is bread and butter income for solicitors. They love it) tell them you want at least a 30min initial free consultation. Take the Will and Letter of Wishes with you and get advice on how to proceed. It is highly complex area of law and you can't do this by yourself. Nor should you have to. X
If that solicitor tries to charge you for explaining either how he has drafted the Will OR how he will go about apply for Probate, that is extremely poor. In that case, you need an initial appointment with a new solicitor (if you tell them it's regarding a death and you have a Will, they will see you. Probate work is bread and butter income for solicitors. They love it) tell them you want at least a 30min initial free consultation. Take the Will and Letter of Wishes with you and get advice on how to proceed. It is highly complex area of law and you can't do this by yourself. Nor should you have to. X
The solicitor that drafted the will has carried out what he was paid to do, when the will was drafted, I would not expect him, and he certainly is not obliged to explain the will to the OP, he should have done that to the deceased before signing it.
As for applying for probate, that would be a new appointment, and would be explained as part of that engagement in general terms, but specifics would only be done at a charge.
The 'free' half hour which is offered by many professional firms, normally will explain the general rules, ie provide general advice, but not provide any specific advice, and certainly not in writing, because the professional insurance cover won't allow it. After all they are trying to earn a living. No different from a car mechanic who might tell you what needs doing, but won't tell you how to do it, as he needs paying for it.
As for applying for probate, that would be a new appointment, and would be explained as part of that engagement in general terms, but specifics would only be done at a charge.
The 'free' half hour which is offered by many professional firms, normally will explain the general rules, ie provide general advice, but not provide any specific advice, and certainly not in writing, because the professional insurance cover won't allow it. After all they are trying to earn a living. No different from a car mechanic who might tell you what needs doing, but won't tell you how to do it, as he needs paying for it.
Wow, that's a lot of money. Glad I did my own. I did think of using a solicitor but then decided he/she would only be using my figures anyway, so did it myself.
Any probate specialist worth his salt will be totally able and willing to advise on continuing trusts. It's how they make money! You could do with seeing a STEP lawyer, Society of Trust And Estate Practitioners as they have the expertise in this area. You can check if someone is a Step practitioner usually on the firms website. Alternatively, the Society itself will have a list of practitioners local to you. I would urge you to take formal legal advice on this. Discretionary trusts work very well but only if they are administered in a way that keeps them performing in a discretionary manner ie without creating an interest in possession trust which is the type of trust that IS considered for the purposes of the Care Act.
I did recommend a STEP practitioner(lawyer or accountants both can be STEP practitioners) in my post above, I suggest you reread this thread from the beginning to see what I have said, I am not the OP (original poster) and I do happen to know a little bit about discretionary trusts.
Personally I don't need to google STEP practitioners, I happen to speak to them on a daily basis, although frankly more about what our kids are up to in normal office gossip, rather than technical matters.
I have tried to use language throughout my posts which I hope others without the benefit of professional training can understand.
The OP was rather confused about the advice given to them and I have tried to explain it in understandable terms.
Personally I don't need to google STEP practitioners, I happen to speak to them on a daily basis, although frankly more about what our kids are up to in normal office gossip, rather than technical matters.
I have tried to use language throughout my posts which I hope others without the benefit of professional training can understand.
The OP was rather confused about the advice given to them and I have tried to explain it in understandable terms.
JugglingMum & Relliot2014, I appreciate all of your comments and realise that the advice was for my benefit & also for general consumption. As you say, it is a complicated matter that needs professional scrutiny. But I think it is also good to know a little bit about the process.
I contacted the original solicitor who have the Will. Using the advice here I think I managed to ask for a quotation for the work that I think is needed....estimates for the various options....so that I can make a decision on cost & suitability. But I do feel that I am the proverbial tail wagging the dog. I shouldn't have to be explaining to the solicitor the different options open to me....the advice here has I think allowed me to do that (if I understood it correctly). Joe Public wouldn't stand a chance .It's almost like I have to learn about the law so that I get the solicitor to do their job.
Many thanks again for all the excellent advice.
Finally did the calculation in a spreadsheet and have decided there isn't much benefit in creating a trust to contain dad's half of the house. Unless the aim was to make mum reliant on LA funding after her assets were used up...which it wasn't.
The aim would have been to get LA to part fund at an earlier stage and then top-up using the trust. But the 'problem' is that LA funding is miniscule and would be dwarfed by any top-up (unless you could find a good quality home that would accept LA rates when mum's assets ran out).
Another 'problem' was that LA rates will probably (definitely!!) increase by 2-3% but care home fees will probably (definitely!!) increase by 5-10%, which means the top-up would (probably/defintely) keep increasing dramatically.
Also because the LA take any income (pensions) then the amount they actually pay is actually quite small....so basically, if you want a decent care home then you need lots and lots of cash...because don't expect any (much) help from the government....indeed the self-funders are subsidising the system because the LA rates are so ridiculously low.
In places where there aren't a lot of self-funder's to prop up the care home system I think this system of government under-funding is starting to fall apart (care homes closing)....partly why Mr Hammond found an extra emergency £2 billion for social care.....but it won't 'fix' the problem, which from a government point of view isn't actually a problem because it is a sneaky (clever!!...because most people don't realise what is going on) way of taxing older people with assets.
The aim would have been to get LA to part fund at an earlier stage and then top-up using the trust. But the 'problem' is that LA funding is miniscule and would be dwarfed by any top-up (unless you could find a good quality home that would accept LA rates when mum's assets ran out).
Another 'problem' was that LA rates will probably (definitely!!) increase by 2-3% but care home fees will probably (definitely!!) increase by 5-10%, which means the top-up would (probably/defintely) keep increasing dramatically.
Also because the LA take any income (pensions) then the amount they actually pay is actually quite small....so basically, if you want a decent care home then you need lots and lots of cash...because don't expect any (much) help from the government....indeed the self-funders are subsidising the system because the LA rates are so ridiculously low.
In places where there aren't a lot of self-funder's to prop up the care home system I think this system of government under-funding is starting to fall apart (care homes closing)....partly why Mr Hammond found an extra emergency £2 billion for social care.....but it won't 'fix' the problem, which from a government point of view isn't actually a problem because it is a sneaky (clever!!...because most people don't realise what is going on) way of taxing older people with assets.
In my view, it's a growing headache even if public finances are currently subsidised by "older people with assets".
An increasing percentage of the population won't have any sizeable assets for funding social care (especially residential care) in the immediate future.
The percentage of people buying / owning their own homes has gone down by 5% in a few years - very bad news for future governments as the sale of people's homes is probably the main source of funding for social care. Then there's the income squeeze, the casualised labour force and fairly high continuing unemployment and under-employment rates. Far higher proportions of people won't have savings up to £14,000 odd (the level at which no individual contributions for care are payable).
