# Buying In Trust



## quarterfloun (7 Oct 2005)

I'm thinking about the future and will be buying the last house I ever will need (hopefully). 
What I'm thinking of doing is putting it into a trust to ensure I have no assets personally to keep the nursing home from selling my house off and leaving the kids with a well dented inheritance.
I also would then in theory, if I lose my job, have my "rent" paid...to the trust as I would have a rent book. Not particularly ethical but not fraudulent either - I'm fed up paying out for nothing, like when I was sick a few years ago - I got more help from neighbours than I did from the Government and I was paying heaps in taxes.
Any ideas on what is legal (not ethical) or possible appreciated.


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## RainyDay (7 Oct 2005)

Who will be the benficiaries of the trust?


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## Observer (7 Oct 2005)

Presumably quarterfloun and his heirs..........................


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## Marie (8 Oct 2005)

Hi Q'f

A financially-astute friend who is Executor for his very wealthy, elderly aunt researched this and advised her to put up to the maximum permitted into a Trust for her nieces and nephews.  Establishing such a Trust more than 7 years prior to death avoids tax liabilities.  I can't (unfortunately) remember the maximum amount you can entrust in this manner.

He suggested to me that I do the same thing with my pittance so my nieces and nephews (I don't have fruits of my own specific loins!) would get the maximum possible when I slough off my mortal coil.  HOWEVER setting a Trust means you don't have access to your capital and cannot dispose of your property which might be a difficulty if you need to get your hands on a few bob urgently between now and your interrment.........or if you change your mind in a few years time and decide to blow the lot on a grand world cruise! . This is not 'tax evasion' it is perfectly legal.  Perhaps you should consult an independent financial advisor to check out the limitations.


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## quarterfloun (14 Oct 2005)

Yeah thats the sort of thing..... I'm just very concious of passing on any property to my kids but also not owning it myself.

Could I not as "minder" of the trust not do what I want with assets in the trust, perhaps sell the house, go on a cruise and buy a smaller house?

After all I would be the main beneficiary along with my wife and children....

The other idea I thought of was putting it in a company name, say QF Property Rental  and rent it to my self at a nominal rent. Only trouble with that would be annual paperwork I suppose. 

Any ideas on how to put things away for the rainy day but also protected from any nursing home charges, inheritance tax probably won't apply, or any other situation where an asset may be disposed of (directly or indirectly by either govermnent, nursing home, creditors (God forbid) etc.


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## dam099 (14 Oct 2005)

quarterfloun said:
			
		

> Could I not as "minder" of the trust not do what I want with assets in the trust, perhaps sell the house, go on a cruise and buy a smaller house?
> 
> After all I would be the main beneficiary along with my wife and children....
> 
> The other idea I thought of was putting it in a company name, say QF Property Rental  and rent it to my self at a nominal rent. Only trouble with that would be annual paperwork I suppose.


 
The settlor of a trust cannot be the trustee so you would not be the "minder".

I'm sure the company idea will fall foul of some anti-avoidance provision somewhere, if a company rents at a nominal rent to a connected person then its likely a market rent would be applied by revenue for tax purposes. 

Also you would own the company so the nursing home still has an asset to chase.

Trusts can have some tax planning uses (often the sums need to be large to justify the costs) but use of trusts for asset protection from creditors is generally frowned upon.


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## Brendan Burgess (14 Oct 2005)

Trusts have very limited applications in Ireland, although they are more common in the UK. Marie, was your wealthy friend in the UK or Ireland?

I went to a talk last year and I struggled hard to see the advantages except in very specific cases to do with agricultural relief. I can't remember the details but if I was planning to leave my farm to my son, I would investigate trusts. Otherwise, I would not bother.

Brendan


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## MOB (16 Oct 2005)

"A financially-astute friend who is Executor for his very wealthy, elderly aunt researched this and advised her to put up to the maximum permitted into a Trust for her nieces and nephews. Establishing such a Trust more than 7 years prior to death avoids tax liabilities. I can't (unfortunately) remember the maximum amount you can entrust in this manner."

This scenario certainly relates to the UK.  Over there, inheritance tax is levied on the estate of the deceased;  the larger the estate the higher the tax - and it is advantageous to transfer while you are alive.  Over here, gift tax and inheritance tax are essentially one and the same, and tax is not based on the size of the estate per se - rather, each beneficiary is taxable depending on his\her personal circumstances (i.e. relationship to deceased and level of prior gifts\inheritances)


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## Marie (16 Oct 2005)

Yes, my experience of being a beneficiary (in Ireland) recently was of how different the system was there, with the inheritors liable for tax rather than tax levied on the estate.  The friend in question is having a struggle as executor to a frail elderly aunt (whose large house in London alone is worth a small fortune  through spiralling property values).  His concern is her conservatism about 'doing' anything at all to protect the estate left to her family may mean that when she dies he will have to take out a very large bank loan or even remortgage his own home in Colchester to pay death-duties, probate costs and her burial expenses as taxes will be levied directly on the estate and he needs funds to pay the tax before the house can be sold.  It's a weird and unwieldy system.

To return to the original post - your descendants (upon whom the duty of tax will fall after your death) can each inherit up to around 250K each (not sure of the exact amount as it rises frequently) without incurring capital gains tax.

Reading between the lines I think your real concern is that if yourself or your wife require nursing or residential care your house would require to be sold to pay these costs and this is _a biggie!!!  _I work in the NHS here in the UK and some of my patients are frail elderly and a real battle goes on with the family trying to persuade us to keep them 'in hospital' so the family home does not have to be sold to pay for care.  Unfortunately that's how things are these days and Social Services automatically put this in process when someone's needs reach that stage.  

Personally I feel the full liability for nursing or care-home charges should start at a higher point of the financial register since for the majority of prudent middle-income families the family home is probably the major part of the legacy for division between several close family members.  I don't know any way around it!  Scotland has opted for full free care of those of its elderly who need residential care.  Perhaps political lobbying might produce some changes in how things are done?   Such a system is a huge disincentive to responsible contribution to the community through work and ethical values. The rhetoric is there are 'too few workers supporting too many dependant elderly' but the sums don't support this!


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