Can setting up a trust help me avoid healthcare costs? HEATHER ROGERS replies

The company I have my internet with recently sent a representative to my home to advise on trust funds.

They tried to persuade me to take one out. I am a 73 year old retired widower with three children. I own my modest bungalow and some savings.

They said it would protect me and my family from future health care costs if my house was in a trust fund.

I’ve looked into it and have seen conflicting advice with some saying the council can still charge healthcare costs on my property.

Some say if I do it early enough, like seven years before it’s needed, it won’t be classed as deliberate deprivation in terms of care home costs. I hope you can advise me because I am quite confused.

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Heather Rogers replies: You don’t say if your will was prepared by an online law firm or if you used a will writing company, but your mention of “send a representative to my house” worries me a bit.

While a local attorney will be happy to come to your home if you find it difficult to get to his office, this is more likely to indicate a pushy “follow-up sale” that can be both expensive and ineffective.

I will deal with the issue of the will first and then move on to your specific question.

How to make sure your will is valid and reflects your wishes

Believe it or not, the will writing industry is NOT regulated. You can:

– Write one yourself

– Use a will writing service

– Engage a lawyer.

In my opinion, the only way to ensure you have proper protection is to hire a lawyer. This is because solicitors are regulated by the Solicitors Regulation Authority.

There are some professional services for writing wills, and some use lawyers to review the wills they draft.

However, many don’t, and your executors may have no recourse if something goes wrong after your death due to a poorly drafted will and bad advice.

Everyone should have a will, and if your circumstances change, you should review it.

You should do this, for example, if you get married – your will usually becomes invalid upon marriage – or divorce, receive an inheritance, acquire new possessions or an heir dies.

It’s best to review your will, even if no changes occur, to make sure no changes in the law affect it.

A good local lawyer will be happy to come to your home if you have health problems. A simple will will often cost around £200 plus VAT if you use a lawyer. More complex wills will cost more. Meanwhile, your lawyer will usually keep a copy of your will for free.

In light of the above, you may want to have your existing will reviewed and consider engaging an attorney if you haven’t already.

Can setting up a trust help you avoid healthcare costs?

As for your question of whether it’s worth establishing a trust, let’s look at what assets are assessed for health care costs.

A financial assessment is carried out by the local authority and under current rules councils will pay all or part of your healthcare costs if your assets are less than £23,250. This will rise to £100,000 in October 2025.

If you move into a care facility and leave your home vacant, the home will be considered as part of a financial assessment to determine your contribution to your care.

Other assets that are taken into account are pensions, savings and investments and an income test is also carried out.

If you need an informal carer to get into your home instead of moving to a care home, the value of your home will not be taken into account.

When it comes to people giving away assets to avoid healthcare costs, including by setting up a trust, local authorities have the power to respond quite harshly.

The first thing to clarify is that the “seven year rule” you mentioned in your question does not apply here.

This only applies to donations in the context of inheritance tax, not to care home assessments.

Giving away assets or your income during your lifetime has possible estate tax and capital gains tax considerations.

In the meantime, this can be classified as ‘theft of assets’ by your municipality. That means you give them away during your lifetime to deliberately reduce the value of your estate. This is regulated in the Healthcare Act 2014.

The financial assessment will ask for assets you used to own, and there’s no time limit on how far into the past your local government will look if it believes you’ve deliberately tried to avoid healthcare costs. They can then include them in the assessment.

If the assets in question have already been given away, this could cause a huge financial headache and legal advice should be sought.

As for the maintenance trust I covered in my column last month, this type of trust does not normally give rise to such a situation because it is a bequest from a will in trust, not during the life of the settlor, and is intended for the protection of the spouse and beneficiaries. However, this makes no sense in your circumstances.

In my opinion, you should consult a lawyer who specializes in asset protection.

If there is a real current reason why you would set up a family trust arrangement to protect your home, which I understand is important to you, it should be very carefully documented at that point.

However, there may also be tax implications to consider and the effectiveness of this action cannot be guaranteed.

Professionals such as accountants, financial advisers and lawyers often deal with people who have been persuaded to spend a lot of money (often exorbitant fees) on setting up trusts that are not suitable for their circumstances and do not work.

Keep in mind that your assets must give you the certainty that you can afford the care you need in the future.

This means you can have what you need without financial worries, rather than having to accept what is offered to you if you don’t pay for it yourself.

These links can be helpful. Charity Age UK has more on asset recovery and income. The Law Society has a search function to help you find a suitable lawyer.

Ask Heather Rogers a tax question

Tax expert Heather Rogers answers our readers’ questions

Heather Rogers, founder and owner of Aston Accountancy, is our tax columnist. She is ready to answer your questions on any tax topic – tax codes, estate tax, income tax, capital gains tax and much more.

If you would like to ask Heather a question about tax, please email her at taxquestions@thisismoney.co.uk.

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If Heather can’t answer your question, so can you read more about help with tax matters here, including resources for free professional advice if you are older and/or on a low income.

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Here, Heather shares tips on how to find a good accountant, including when to seek help, hiring the right type of company, and typical costs.