1. Why should I bother?
You don’t need to do anything but if you go into care then it is likely that a large part of your assets, including your house, will be used for care costs instead of going to your family.
2. But my family will look after me.
Hopefully you will never need to go into care but unfortunately 1 in 3 women over 65 and 1 in 4 men over 65 go into care at some time, so it can never be ruled out.
3. Is it worth it?
If the scheme saves you having to pay upwards of say £30,000 per year if you are single and £60,000 if you are a couple towards your care costs then obviously it is worth it.
4. Why did my previous solicitor not tell me about this?
Most solicitors do not specialise in this area.
5. What if I don’t go into care?
It is still worth it as it will avoid the cost, delay and trouble involved in winding up your estate. If your house is still in your name(s) when you die then you will need a solicitor to carry out the executry procedure which could cost several pounds. If, however, your assets are in a Trust then the remaining trustees can deal with the house immediately after you die and thereby avoid the executry procedure altogether.
6. What happens with improvement grants if my house is in a Family Protection Trust?
This may affect the amount of repairs or improvement grant you could obtain in the future. You could take the house out of the Trust to get the full Grant and then put it back in again but this would mean that you lose the accrued protection of the Trust so far as the house is concerned and you would effectively be starting the Trust process over again in that regard. You would be required to pay 3rd party outlays such as government registration dues again but no further fee would be charged. Also, depending on the value of the other assets in the Trust and of any other lifetime chargeable transfers previously made by you, the transfer of the house back into the Trust could give rise to a charge to lifetime inheritance tax. If this situation arises it is essential that you speak to us before making any arrangements.
7. What happens if I want a further advance from my lender or take out a new mortgage or equity release?
You will probably have to take the house back out of the Trust and afterwards see if your lender will consent to it being transferred back into the Trust. This would mean that you lose the accrued protection of the Trust so far as the house is concerned and you would effectively be starting the Trust process over again in that regard. Also, depending on the value of the other assets in the Trust and of any other lifetime chargeable transfers previously made by you, the transfer of the house back into the Trust could give rise to a charge to lifetime inheritance tax. If this situation arises it is essential that you speak to us before making any arrangements.
8. Why do I need two Solicitors?
If your Will leaves your estate to more than one person then it is important that there are two solicitors as Trustees to outvote the remaining family member, otherwise he or she could take control. With two solicitors this ensures that what you want to happen after your death actually will happen.
Can I trust the Solicitors? Yes of course you can, solicitors are professional people. They are not beneficiaries in the Trust. They cannot benefit from the Trust in any way and, like all solicitors, they are supervised and controlled by the Law Society of Scotland.
9. What about on-going fees?
There aren’t any. If a Court Action is needed our preferred panel solicitors will attend to that for you free of charge provided they feel at their sole discretion that there is a reasonable prospect of success and that it is sensible to raise or defend such an Action.
10. What type of assets can be placed within the Family Protection Trust?
Commonly clients place their house and savings within the Trust. Because all capital outwith a trust could be taken for care costs, our preferred panel solicitors will usually recommend that only a nominal amount is left out.
11. Are there any assets which cause a problem if they are placed within a Trust?
Care should be taken in relation to any assets with a built-in Capital gain. A disposal for Capital Gains Tax purposes potentially arises on the transfer to Trustees of a Settlor-interested Trust. Our preferred panel solicitors will advise you on this if relevant.
12. Can other assets be added later?
Yes-but this will start the “clock” running again in relation to the new Assets.
13. Is there any limit on the value of Assets placed within a Family Protection Trust?
Yes – if you place Assets valued in excess of your available Nil Rate Band within the Trust this would create an immediate charge to lifetime Inheritance Tax (20% on the value over the current Inheritance Tax nil rate band placed within the Trust). And if the value of the Assets in the Trust at the end of 10 years is above the Nil Rate Band at that time, inheritance tax is payable at 6% of the excess. Our preferred panel solicitors will advise you on how much to place in the Trust.
14. When is the best time to set up the Family Protection Trust?
As soon as possible. Local Authorities can retrospectively review the circumstances in which an FPT was set up at any time. Clearly, if the FPT was set up at a time when you are in good health, living independently and have no prospect or intention of entering long term care then there should be no problem. However, Local Authorities can review medical and other records and so any pre-existing medical condition or even comments made while in discussion with Local Authority social workers or carers could become relevant at a later date.
14. Can a Family Protection Trust be set up after a client enters Care?
Yes. This would be a deliberate deprivation of capital and therefore not work for care costs. But it would still be worth doing to avoid executry costs.
15. Can I change my mind?
Yes. Provided the majority of trustees agree, then you can close the Trust and transfer the Assets back into your name at any time.
16. Can I move house?
Yes. Provided the majority of trustees agree, you just move house in the usual way except that the deeds are signed by the Trustees rather than by you alone but that makes no difference. The costs are the same.
17. What happens if one of us dies?
Nothing. The Trust, and the protection it gives, simply continues as before until the second of you dies. The survivor continues to retain control of the Trust.
18. What if I have a mortgage?
Usually, you cannot put your property into a Trust if you have a mortgage without the consent of the lender. If you have a mortgage then our preferred partner solicitors will approach the lender and seek consent. Sometimes they are able to get consent in which case you can put the property into the Trust and sometimes consent is refused.
If consent is refused that is not the end of the story. You could perhaps repay the mortgage or repay part of it. Your family could perhaps repay the mortgage or repay the other part of it. Remember it is always in your family’s interest to have the mortgage repaid so that your property can be protected.
19. What happens if one of us becomes incapax? (Scottish term for incapacity)
Nothing. The remaining Trustee simply continues. If your Assets were not in the Trust, your family might need to apply to the Court for a Guardianship Order which is expensive, takes time and does not usually give as much control as an FPT.
20. What happens if one of the other Trustees dies?
A new Trustee is simply assumed in his or her place.
21. Who gets my estate when I die?
Whoever you have left it to in your Will. When you die it is up to the Trustees to decide who is to get what but the Trustees will simply look to see what you put in your Will and it is likely that that is what will happen. It is important to have two Solicitors in the Trust to make sure that happens.
22. Does my Will not matter then?
Your Will is still very important. Any estate which is still in your name when you die will be dealt with in terms of your Will and any estate which is in the Trust is usually dealt with according to the wishes expressed in your Will.
23. Why should I use our preferred partner solicitors?
These Solicitors specialise in care cost protection for the elderly and have established a great deal of expertise in dealing with Family Protection Trusts, Transfers of Titles, the tax and inheritance tax implications and dealing with the Social Work Departments and the Local Councils when the you may have to go into care. There are many different aspects which have to be taken into account and it is very important to ensure that the solution to one does not cause a problem elsewhere.
Remember, if you want your assets to go to your family and not the Council, you need a Family Protection Trust.
To receive qualified and ethical advice in relation to any aspect of your Scottish Will-Writing and Estate Planning requirements, please visit our contact page.