Do you trust your house to someone else?

It’s understandable that we want to look after our children and make sure we leave them something when we die. But do you gift your house to them during your lifetime out of concern for protecting it from being sold to pay the costs of your care?

This is unlikely to be successful in avoiding care costs and could even see you losing your home if the unthinkable happens and your child dies, divorces, goes bankrupt or even just falls out with you.

This is when “asset protection trusts” can seem attractive, but full advice should be obtained from an expert professional as well as listening to the salesperson, before you sign on the dotted line and give away control of your home.

Despite the convincing promises that often accompany such wonder trusts, they aren’t always successful and can actually prove cumbersome, adding complication and expense around your most precious financial asset.

If the local authority suspects that you have given away assets to individuals, or put them into a trust in order to avoid paying for your own care, they will make detailed enquiries as to why you no longer own your own home.

If they can show that you gave your house away to avoid paying for your care, they will treat this as a deliberate deprivation of capital. They can treat the house as ‘notional capital’ so they may still refuse to pay for your care, while you no longer have any way of paying for your care.

If you’re healthy when you put the house in trust, it can be hard for local authorities to prove this intent, but this is a big risk. Local authorities are balancing increasingly diminishing incomes with increasingly large outgoings and are unlikely to roll over and agree to fund your care in such circumstances without a fight.

There can also be adverse tax consequences of putting your house in trust and these should be carefully considered in each case.

If you do proceed with the trust, be cautious over who you appoint as the trustees. Usually all the trustees have to be unanimous in agreeing to a subsequent sale of the house. If you appoint the provider as one of the trustees, do you want to ask a stranger if they agree to you downsizing in future years? Only appoint people you trust as you are giving them the ownership and control of (usually) your biggest asset.

Some protected housing developments don’t allow anyone to be an owner apart from the people who live in the accommodation; this makes it impossible for a replacement home to be bought from the proceeds of the initial house at such a development since there are trustees who own the money and not all of them will be living in the new house. The legal owners and the occupiers have to match or the property can’t be purchased.

There are ways of planning ahead and looking at protecting the home while also providing funds so the survivor of a couple can choose the care that is right for them. These avoid the risk of having to rely on ever-more-stretched local authorities to decide on how their care needs are met.

Trusts can be set up for many good reasons, but it is vital to be cautious when thinking about gifting your home to one in your lifetime. Take professional expert advice as everyone’s circumstances differ and a professional adviser can help you find the solution you are comfortable with.