A couple quite relaxed after putting their home into trust, giving the pass of mind that the property will remain in the family

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Home Protection Trusts

A Home Protection Trust can protect your home and ensure that it, or the cash value if it is sold remains in the family. What is concerning is that there are lots of ways in which your property could be lost to them, and this Trust is designed to cover many of these as possible.

You might choose to give your home to your children outright, whilst you are still alive in an attempt to protect your home, but there are many reasons why this might go wrong, and might end up with your home being sold even if you are still alive. This is where the Home Protection Trust can help.

Giving your home away without a Home Protection Trust (HPT)

You might consider giving your home away without a Home Protection Plan can have disastrous consequences. Here are a few examples:

if your children (or beneficiaries) get divorced, your home could be included in a divorce settlement and lost to future generations of your family. A sale could be forced whilst you were still living there.

If one of your children (or beneficiaries) died, your home could pass to their spouse and so not to your other children, grandchildren and other potential beneficiaries.

Many people nowadays have difficult to manage debt, and many people are able to hide this well. It may be that a beneficiary or their spouse is a spendthrift, could be sold to pay off their creditors.

If the property goes up in value after you have given it away, there could be a liability for Capital Gains Tax.

There could be a difference of opinion between your children, or between you and your children without you being able to have any legal say.

The Home Protection Trust aims to provide protection against all of the above scenarios.

The Benefits of a
Home Protection Trust

If you should remarry, or your spouse remarries after your death, any Will that you have made would be revoked and if you (or your surviving spouse) died, your assets could become the property of the new spouse and subsequently pass to their children. The Home Protection Trust offers assurance that your property will remain within your family.

If any of your children get divorced, your property could form part of the financial settlement. The Home Protection Trust ensures that because the assets are held in a Discretionary Trust, they cannot form part of the settlement as no beneficiary has an absolute right to the assets of the Trust (although it may be a factor taken into account).

If any of your children die prior to their spouse, your property could form part of the survivor’s Estate and could then pass outside your family. The Home Protection Trust ensures that because the assets are held in a Discretionary Trust, they cannot form part of the survivor’s Estate and only your nominated beneficiaries (eg. children and grandchildren) can benefit.

If any of your children become bankrupt or have a court order issued against them, their creditors could take the property to repay the debts. The Home Protection Trust ensures that because the assets are held in a Discretionary Trust, they cannot be included in any bankruptcy settlement since no beneficiary has an absolutely right to the assets of the Trust (although it may be a factor taken into account).

If any of your children or grandchildren were unable to effectively manage their affairs due to vulnerability for health, mental health, addiction or social reasons, then the Home Protection Trust would protect your assets, as the Trustees could choose not to give the vulnerable beneficiary money at a time when it could place them in harm’s way. Likewise, if one of your children or grandchildren are or were to become disabled, or long term sick the capital of the Trust would not be considered in terms of assessing whether they are eligible for state aid or benefits.

Home Protection Trusts also can provide a significant cost saving advantage during Probate, as no Grant of Probate is required if the house needs to be sold straight away as the house falls outside of the estate. Usually, before a house can be sold, Probate needs to be granted, which is a part of a process that can cost thousands of pounds and take many months to complete.

As an example, with a £300,000 house value, and a typical 2% + VAT probate fee, this could reduce probate costs by around £7,200!

A consequence of setting up a Home Protection Trust is that, in certain circumstances, assets held within the Trust may be protected from the impact of long term care home fees.

The Home Protection Trust is primarily a solution for Estate Planning issues but may also protect the capital value of your assets from being used to fund long term care home fees, provided that it was set up for other reasons, and it was not reasonably foreseeable that you would enter long term care.

How The
Home Protection Trust Works

The Home Protection Trust involves a legal transfer of your home into a Trust, which is managed by your chosen Trustees in accordance with the Trust document. It is therefore essential that you pick Trustees who shall act in the best interests of the beneficiaries (you may also appoint yourselves as Trustees). Most people pick themselves and their children or close family members to be Trustees of their Home Protection Trust. The Trust lists potential beneficiaries who can benefit from the Trust and these would typically include yourselves, your children and grandchildren, and any other people who you might wish to benefit should your immediate family not survive you.

The Home Protection Trust gives you the right to live in the house for the rest of your lives and also gives you the right to downsize or move home, should you wish to do so in the future. Subject to you having a life interest in the house until your death, your home is held within a ‘discretionary Trust’. A discretionary Trust has potential beneficiaries such as your children and grandchildren but they do not receive anything from the Trust unless the Trustees agree to this.

The Home Protection Trust (HPT) can run for up to 125 years, so if you no longer wish to live in your property or have died, the Trustees can then decide whether the home should be sold and the Trust wound up, or that the Trust should continue. The Trustees will be guided by the Trust document as to whom, and in what shares, beneficiaries should receive the capital of the Trust.

One advantage of Trustees being given the right to continue the existence of the Trust is that if a beneficiary is going through divorce, the Trust assets do not need to be transferred to them until the divorce has been completed (otherwise, they may well form part of the divorce settlement and so be lost from the family). Your home is effectively held by the Trustees and does not automatically belong to any of your children after your death. Therefore, the value of the house will also not be considered if they go through a bankruptcy or require recourse to state help, such as disability or employment support benefits.

Are There Any Risks With The Home Protection Trust?

Our Home Protection Trust is created by our sister firm which is a firm of Solicitors regulated by the SRA.

Not all Home Protection Trusts are the same, and some are more robust than others. We can proudly state that we have not had a successful challenge from any local authority against one of our clients who have put their house or funds into one of our Home Protection Trusts.

The Trusts are known to be higher risk and subject to challenge – particularly where they not set up professionally and properly, with all of the relevant circumstances borne in mind – and so we are particularly honoured never to have had one of our Trusts overturned during the 20 years we have been in operation.

Frequently Asked Questions

Yes. You always remain in control. It is important that you are involved in all decisions involving the Trust. Therefore, the Trust ensures that your permission is necessary prior to any decision being made.

Yes, you are able to move home should you wish to do so. Your home can be sold and a new one purchased in the name of the Trust. If you plan to go into rented accomodation, the proceeds of the sale can continue to be held in the trust.

Trustees should be people you Trust. It is common for adult children or trusted adult family or friends to be Trustees. You are also able to appoint yourselves as Trustees, although others will of course need to be appointed alongside you. You should appoint between two and four Trustees. We can act as professional trustees should this be most suitable for you given your circumstances.

You can write a Letter of Wishes that will explain to your Trustees your intentions with regard to the property for after your death. If you opt for our Storage and Maintenance services, we will safely store this alongside the Home Protection Trust document.

Home Protection Trusts are not tax saving devices but they are tax neutral, and so do not lead to any extra tax needing to be paid. Provided that less than the value of the Nil Rate Band is put into the Trust, there will be no inheritance tax to pay and no Stamp Duty Land Tax to pay. Capital Gains Tax will not be payable on any increase in value which would not be the case if your children owned the property themselves.

The new Residential Nil Rate Band means that the amount that can be given by a married couple to children or grandchildren free of inheritance tax has increased, in the right circumstances, to £1,000,000 (it is half these amounts for an individual). If you need further information regarding the tax implications of setting up a Home Protection Trust, or otherwise, please do not hesitate to us.

For tax reasons, it is not generally advisable to put a home into a Home Protection Trust unless it is your primary residence. If you are considering doing this, please contact us for further information.

Yes, although the Home Protection Trust is primarily to protect your home, you can add other assets to the Trust.

The purpose of the Home Protection Trust is to protect your home from future events involving your beneficiaries, and to allow your property to be sold after your death before a Grant of Probate has been obtained. However, a Home Protection Trust may also protect your home from your future creditors such as your local authority. The Home Protection Trust is not a guaranteed solution for protection from long term care fees.

The cost of a Home Protection Trust is 1% of the property value, with a minimum charge of £2,995.

The Trust requires all trustees to agree. It is therefore important that all trustees have a Lasting Power of Attorney in place to ensure the trust can continue to run as intended.

What next?

I am a senior consultant for Goodwills Legal Services Ltd and I can provide you with advice, after taking the time to understand your circumstances and requirements. We can explore the Home Protection Trust together, and make sure it is the right choice for you and your loved ones.

I can offer you a free consultation which can be held in the comfort of your own home. Alternatively we can have an initial discussion over the telephone, or we can arrange a meeting at the Fairfield Enterprise Centre in Louth.

You have nothing to lose apart from an hour or two of your time to see whether Goodwills are the right company and I am the right person to help you with your estate planning needs.

I look forward to being able to help you get these outstanding matters resolved and protect your assets for you and your loved ones.

Please call me on 01507 707123 or email goodwills@trustedoutcomes.co.uk to start the ball rolling.

Jon-Paul Edwards is an experienced Goodwills Senior Client Consultant. He lives local, is down to earth, speaks in plain English, and has strong family values.

Contact Info

We are always ready to help you. You may drop us an email, give us a call or use our contact form, choose what suits you the most.

01507 707123. If you call during office hours and I am with a client, you are able to leave a message with the Fairfield Enterprise Centre reception team.

Goodwills Trusted Outcomes Ltd, Fairfield Enterprise Centre, Lincoln Way, Louth, LN11 0LS. Covering Louth, East Lindsey and surrounding areas.

goodwills@trustedoutcomes.co.uk

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Availability

East Lindsey (Louth, Horncastle, Mablethorpe, Sutton-on-Sea, Skegness, Alford, Woodthorpe, Wragby, Spilsby and more), Cleethorpes, and Grimsby. If you are close to these areas, get in contact, we may still be able to provide a home visit service. Otherwise we can offer a remote service across England and Wales.

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Should you prefer to meet away from your home, we can arrange a consultation with you at the Fairfield Enterprise Centre in Louth, which offers free parking and easy access. Consultations will be held in a ground floor meeting room between the hours of 9am to 5pm Monday to Friday.