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Family Trusts

There are numerous reasons why a person might legitimately want to transfer his/her property to a family member or into an Asset Potection Trust otherwise known as a Family Trust. If you are considering this you may find the following of interest.

Points to consider in relation to a transfer of property to family members

REASONS FOR TRANSFERRING THE PROPERTY INTO A FAMILY TRUST (ASSET PROTECTION TRUST)

Transferring your property into aN asset protection trust also know as a family trust gives more security. Setting up a Family Trust involves transferring the family home into a lifetime discretionary settlement. The trust is usually structured so as to provide the person(s) transferring the property a right of occupation.

By tramsferring a property into a trust matters are greatly simplified on death as if there are no significant assets in the deceased’s estate a Grant of Probate is not required. The title of the property can be dealt with immediately and costs are saved.

When a property is in a trust difficulties in dealing with the property are avoided.  While it is always prudent to have a Lasting Power of Attorney this expense can be avoided if the property is the only asset of the donor.  If there is no Lasting Power of Attorney in place the need to involve the Court of Protection can often be avoided.  Involvement of the Court of Protection is expensive, time consuming and for most people a stressful experience.

The trustees of the Family Trust, in most cases, are the person(s) transferring the property and two members of the family. The family members who are to ultimately benefit from the sale proceeds of the property are named in the Trust Deed as beneficiaries. By transferring the property into a Family Trust it means that the property no longer belongs to the original owners for the purposes of any financial assessments under current legislation.

It is important that a person(s) transferring the property should understand that if the property is in trust, the trustees would be in control of the trust property. The person(s) transferring the property would have a right of residence. If one or more of the trustees/beneficiaries died, got into financial difficulties or divorced, this would not affect the running of the trust as usually these people do not have an absolute interest in the property until funds are distributed (usually, when the property is sold).
POINTS TO NOTE

It is important that it is understood that disposal of a property whether by way of transfer to family members or by way of transfer into a Family Trust does not avoid Inheritance Tax.

If a person(s) is intending to transfer a property purely to deprive them of assets in order to avoid paying any type of fees, for example nursing home fees then the transfer may not be effective. The burden of proof in the context of why a property is being transferred rests with the Donor during the first six months and thereafter lies with the Local Authority but there is no time limit. It is a popular misconception that there is a limit ofofive or seven years after which time no questions would be raised.  In this context it is worth bearing in mind that we charge £975 plus VAT to carry out the legal work to transfer the property into a trust.  In addition there are disbursements that vary in each individual case and usually the total is about £1,200.

There are, of course, a number of reasons why a person might legitimately transfer his property:

We have prepared this as a “thought provoker” and it does not purport to provide legal advice. If you would like to discuss the points raised in this note in the context of your actual circumstances, please contact Clair Dunkerley on 01429 235616 email cdunkerley@tmjlegal.co.uk or Catherine Turner on 07793201274 email cjat@tmjlegal.co.uk