The use of trusts as a means of protecting assets from care costs is a popular “Sunday papers” topic. However, much of what is written comes from an English perspective. Those based in Scotland need to be careful, as Scotland has its own legal system with its own unique trust laws. Nonetheless, people on both sides of the border have the same concerns about protecting their assets and savings, and with an aging population the issue of care costs is not going to go away, nor are the costs involved likely to come down. Accordingly, this is hopefully a useful look at the issue from a Scottish perspective.
One possibility is for you to create a trust during your lifetime by signing a Deed of Trust. The ownership of your house is then transferred into the trust, but with you retaining a right to carry on living in the house for as long as you need. The Deed of Trust can also be set up to allow the trust to sell the house and either buy a replacement property for you to live in or retain and invest the proceeds to provide you with an income.
The trust ends either when you no longer need it or on your own death, at which point the house or the proceeds from its sale pass to the beneficiaries that you nominated in the Deed of Trust, whether that is your children or someone else. The aim is clear enough: to ring-fence the house from care costs by transferring it out of your personal ownership. This is also a more secure option than simply transferring the house to your children outright, as that situation can leave you vulnerable if any of your children were to die or hit financial difficulties.
There are other options available for couples that own property jointly, and these can be discussed as an alternative to a trust.
Trusts have a variety of other uses, including managing assets for vulnerable or incapable beneficiaries. For instance, a parent of a child with disabilities can set their Will up so that the child’s inheritance does not pass to the child directly, but instead goes into a special form of trust that can be used for that child’s benefit. In that way, the money can be held and managed easily, but with no disruption to any means-tested benefits that the child may be receiving. Trusts can also be built into Wills to protect young beneficiaries, or to ensure fair division of your estate if you have children from a previous relationship.
Blackadders has its own dedicated Trusts team, who are ready to assist with all manner of trusts queries that you may have.Scott Williamson Partner – Private Client
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