A Question of Trust

A common question asked nowadays is “if I put my house/assets into a Trust, that means they can’t be touched when it comes to care fees, right?” The answer is not straightforward.

Whilst trusts can be a useful vehicle for some dependent on their circumstances, there are many pitfalls of which people aren’t aware.

Ailidh Ballantyne Head of Wills, Powers of Attorney and Estates outlines the potential pitfalls of Trusts under Scottish Law.

Setup Fees and Long-Term Administration Costs of a Trust

To establish a Trust can be an expensive process. This is due to not only legal fees, but there are ongoing administrative costs together with tax return fees. This additional layer of complexity and burdensome paperwork can be off-putting and it is important to consider whether the benefit of having a Trust in place will outweigh the cost.

Do You Really Losse Control of Your Assets in a Trust?

Once assets are placed into a Trust, the Trustees of that Trust own them; not you. So for instance, if you place your property into a Trust, you will no longer be the owner. This means that if you want to downsize or move house, you will require authority and agreement from the Trustees to do this. Similarly, any funds that may be left over from the sale of the property will not be paid to you, but instead will form part of the Trust and distribution of that money will be decided by your Trustees.

What is Deliberate Deprivation of Capital and How Could It Affect You?

If you place assets into a Trust with the intention of trying to avoid paying for care costs, you can be considered as having deliberately deprived yourself of that asset. When the financial assessment is done by the local authority to assess your contribution to care, if they take the view you have deliberately deprived yourself of capital in order to avoid paying for care fees, they can bring that asset back into the overall calculation as if you still own it. For this reason, you have to be incredibly careful before deciding to place assets into a Trust – it may not achieve what you want it to achieve.

Our advice would be to tread carefully when it comes to Trusts. With the loss of control, high fees and administration together with a potential deliberate deprivation element, it may be best to explore alternative options when it comes to estate planning. Having a properly drafted Will is a great start. Having a discussion with a financial adviser can also prove to be useful too.

If you wish to discuss how best to plan your estate and look after your affairs, we would be delighted to assist. Please do not hesitate to contact our Wills, Powers of Attorney and Estates Team today.