HOME PROTECTION TRUSTS

THE HOME PROTECTION TRUST

The ideal situation is to own nothing but to control everything, and to ensure that such control can pass on to others who in turn will own nothing but gain control of everything. This concept often reserved for the rich 

Having worked hard throughout your life to buy your own home and to secure ownership of what is likely to be your most valuable asset, understandably you want to ensure that it will ultimately pass to your family and that it will be protected for their benefit. 

To understand trusts, we must travel back in time to look at where and why trusts came about. 

The first trusts to hold property were set up in England in the 11th century. By the 15th century, they were common.

Trusts were mainly used by landowners to protect their land from greedy lords and kings. Back when knights rode horses and swung swords, there were hundreds of taxes and limitations on what people could and couldn’t do with their land. 

If a king or lord found a landowner had committed a ‘crime’, they could throw him in jail (or worse) then seize his land and leave his family with nothing.

This was why smart landowners moved the ownership of their land to trusts, which meant they weren't bound by the same tax rules and limitations as individuals. 

More importantly, their land was protected. If they were found guilty of a crime or sent to war, the king or lord couldn't take the land because the trust owned the land, not the individual. 

Instead, the landowner’s family could assume control of the trust and the land. The land never changed hands, so there was no tax when it was transferred to the family or heir.

Should you use a trust today?


Today we still have tax laws like in the old days. We also have a very real need to protect our assets.

For example;

• If you are not in a position to manage and maintain your home then who has the legal right to do so on your behalf?

• Should you no longer reside in your home then your family may wish to rent the property in order to maintain the home and gain the best financial rewards for you, what legal rights do they have to do so?

• When you die, whether you have a Will or not, people can come out of the woodwork and claim a share of your estate!

• Whilst most of us wish our children to inherit our home, timing can make all the difference. If a child is having issues for example their marriage is in difficulty, their share of your home could be lost to other parties and not pass to your children as you intended.

• Our families needs are constantly changing, leaving your home to specific members of your family may deprive others of the vital funding they need for circumstances which did not exist when you wrote your Will.

• A disabled or vulnerable member of the family will need your help and support both during your lifetime and following your death. How can you ensure this will happen? When you die, the costs and time it takes to administer your affairs can be a negative factor, this often means that the potential value of your home and inheritance for your family is not fully realised.

• Inheriting your home directly may increase future family inheritance tax liabilities, and ultimately mean more is lost to the taxman. 

Family Trusts can help you and your family avoid some of the following:

Probate Fees:
Probate costs are often much higher than expected. Some solicitors and banks can charge around 4% for dealing with your estate after your death. There can also be some time delay when administering an estate. By placing assets into the trust, probate will not be needed for those assets. 

Care Home Fees:
The funding of future care home fees plays heavily on many peoples minds. Some people are often worried that they will have to sell their homes to pay for their care. 

If you own assets above £23,250 (2019) and need residential care in later life you are expected to pay for all the costs and may have to sell assets such as your home to pay for care. If you have already placed your house into a family trust during your lifetime it is highly unlikely that it can be used toward these costs.

The principal is similar to Protective Property Wills but these only protect one half of the property. If the surviving spouse needs full time care then half the value of the house could be taken to pay towards your care.

Mental Incapacity
A way of obtaining help with your finances, should you lose capacity, is to prepare a Lasting Power of Attorney. A family trust will work in the same principal but without having the need to apply for registration at court. A family trust will enable you to retain full control of assets with the help of other trustees – namely your close family members.

Bankruptcy
Subject to conditions, placing assets in a trust may mean they are not seized if you or your children, after your death, become bankrupt.

Claims on your estate
Some people are concerned that a claim may be made on their estate on their death – for example by estranged children, ex spouses etc. All assets within the trust are safe from such claims.

Remarriage Problems
Anyone who remarries faces the problem that if their assets go to their new spouse when they die, their own children may be disinherited. This will not happen to assets within a family trust.

Children with Problems
If you have children with drink, drug, gambling, or alcohol problems or just ‘spendthrifts’ they may benefit from some independent control over their inheritance. 

Children’s Divorce
Assets in a living trust are protected from loss if the worst comes to the worst and your children divorce in the future. The assets held within the trust are sheltered from any divorce proceedings.


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It’s best to illustrate the problem with an example:

Let’s take Mr and Mrs Smith. They are married with an adult child and are both 70 years old living in England. They own their house worth £150,000 and have savings between them which are worth £50,000.


When they wrote their Wills, they wanted to keep things simple. Their Wills say that when one of them dies, everything passes to the survivor. Then, when the survivor dies, everything passes to their only child. This is a common arrangement for married couples with children.


Now let’s fast forward 5 years. Mr Smith dies and, in accordance with his Will, his Estate passes entirely to Mrs Smith. Mrs Smith has all the assets transferred into her sole name including their family home. Mrs Smith now has assets worth £200,000 in her own right.

Now let’s fast forward another 2 years. Mrs Smith is struggling with her health and the practicalities of running her home by herself. She suffers a fall which leaves her unable to manage her affairs. Whilst her adult child offers support, he can’t look after his mother on a full time basis. Mrs Smith has to move into a residential care home.


Mrs Smith has her needs and finances assessed by the Local Authority. Because Mrs Smith has more than £23,250 she has to pay for her own care home fees. The cost of the care home is £30,000 a year. Mrs Smith stays in the care home for 5 years until she dies, so the total cost amounts to £150,000.


Because of the cost of the care home, the value of Mrs Smith’s Estate reduces from £200,000 to £50,000 and her son receives an inheritance of £50,000.



For some couples this scenario is fine, but for many couples it won’t be. There is a desire among many people to try and protect as much of their wealth as possible from being used for care home fees.


The Council for Licensed Conveyancers regulates Goddard Dunbar & Associates Ltd.

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