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How do Trusts work and are they worth it?
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Dennis .
Posted: 09 March 2025 12:48:49(UTC)
#1

Joined: 26/12/2007(UTC)
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My wife and I have equity ISAs approaching £1m which we hardly touch as we have good pensions and a house worth a similar amount. We are in our mid 70's and looking for information about putting some of our assets into a Trust. Is there a guide somewhere on how Trusts work and if they are actually effective at IHT shielding these days and what are the pros and cons? We have three grown up children who are all financially stable and in good jobs. I might end up speaking to an IFA but want to be up to speed before as I never trust these guys.
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CSJ
Posted: 09 March 2025 14:18:48(UTC)
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I feel the same and find it difficult to find a really useful article comparing various trusts and their use in IHT planning. My wife and I have assets of around £3.5m with about £2m in ISAs. I would be afraid of losing ISA benefits if we used trusts but would love to see some case studies on this matter.
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Dennis . on 09/03/2025(UTC), Guest on 11/03/2025(UTC)
Stephen B.
Posted: 09 March 2025 14:43:12(UTC)
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What are you trying to achieve vs just giving the money to your children? People may use trusts if children are young or irresponsible but it doesn't sound like you think that's the case here.
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Dennis . on 09/03/2025(UTC), Guest on 12/03/2025(UTC)
Dennis .
Posted: 09 March 2025 14:50:04(UTC)
#4

Joined: 26/12/2007(UTC)
Posts: 1,018
Stephen B.;337003 wrote:
What are you trying to achieve vs just giving the money to your children? People may use trusts if children are young or irresponsible but it doesn't sound like you think that's the case here.


I suppose one thought is trying to shield some money from care home fees (is that possible?) and what if we don't survive for 7 years etc. If my wife goes into care would they come after my money and vice versa.

We already give each of our children £150/month out of excess income which goes into their pensions plus £1k each for birthdays and Xmas to use up the £3k each IHT allowance.
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Stephen B.
Posted: 09 March 2025 15:07:15(UTC)
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Dennis .;337004 wrote:
I suppose one thought is trying to shield some money from care home fees (is that possible?) and what if we don't survive for 7 years etc. If my wife goes into care would they come after my money and vice versa.


I'm not sure what you mean by shielding from care home fees. If you're talking about relying on local authority funding then I'm not sure it's a good idea anyway, better to fund privately if you can as the care will probably be better, but I think local authorities can claw money back if they think you deliberately gave it away to avoid paying. Also if you have a house you effectively can't give that away and that will probably fund a few years of care home fees. Care homes reduce your IHT problems by reducing the size of your estate, but that possibly isn't what you have in mind!

The 7 years is a separate issue, you can potentially take out term life insurance to cover it - someone has commented on that it another thread.
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Keith Cobby on 11/03/2025(UTC)
Big boy
Posted: 09 March 2025 15:48:04(UTC)
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Joined: 20/01/2015(UTC)
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Family Trusts maybe using controlled Trust for IHT.

As far as I am aware there is no particular benefits for IT/ICs over say Funds.
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John Bleke
Posted: 09 March 2025 15:48:05(UTC)
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Just give as much as you can and survive 7 years! There's a sliding scale and you're not that old yet.
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Keith Cobby on 11/03/2025(UTC)
RT7
Posted: 09 March 2025 15:54:50(UTC)
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Hi Dennis,

I very much doubt that you will qualify for state-funded care.

Your local council will conduct a needs assessment when considering the amount of care you/your wife may need, this will include a financial assessment. In England currently, if your financial assets are worth more than £23,250, you will have to pay all care fees yourself.

If you / your wife deliberately try to reduce the value of assets to get below the £23,250 threshold, by say gifting money to children etc, it is likely to be considered “Deprivation of Assets”, the Local Authority will add back value of these assets to determine total value of assets in their means test.

I have no idea what other consequences there may be for being caught trying to "Deprive" assets in these circumstances (is it Financial Crime ?), or indeed, how thorough your Local Authority will be in their investigations. I imagine they probably make some assumptions about your personal wealth based on your address/postcode, they will seek to review bank statements, tax returns etc.

Regards
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Helen L on 09/03/2025(UTC)
RT7
Posted: 09 March 2025 16:02:02(UTC)
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Dennis .;337004 wrote:
Stephen B.;337003 wrote:
What are you trying to achieve vs just giving the money to your children? People may use trusts if children are young or irresponsible but it doesn't sound like you think that's the case here.


I suppose one thought is trying to shield some money from care home fees (is that possible?) and what if we don't survive for 7 years etc. If my wife goes into care would they come after my money and vice versa.

We already give each of our children £150/month out of excess income which goes into their pensions plus £1k each for birthdays and Xmas to use up the £3k each IHT allowance.


A quick Google search suggests "For couples, the local authority can only consider the assets that belong to the person requiring care. Joint assets are typically split equally, though this can be adjusted if you can prove a different ownership arrangement"

I think Citzens Advice are experts on this subject, and will provide free and impartial advice
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Big boy
Posted: 09 March 2025 16:05:48(UTC)
#10

Joined: 20/01/2015(UTC)
Posts: 6,685
Dennis .;336993 wrote:
My wife and I have equity ISAs approaching £1m which we hardly touch as we have good pensions and a house worth a similar amount. We are in our mid 70's and looking for information about putting some of our assets into a Trust. Is there a guide somewhere on how Trusts work and if they are actually effective at IHT shielding these days and what are the pros and cons? We have three grown up children who are all financially stable and in good jobs. I might end up speaking to an IFA but want to be up to speed before as I never trust these guys.


“I never trust these guys” but you trust Forum Members with very little knowledge.

What don’t you trust.
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