What Are the Disadvantages of Putting Your House in a Trust?
Placing your home in a trust is often promoted as an IHT-saving strategy, but in most cases it creates more problems than it solves for homeowners in England and Wales.
Transferring property into a discretionary trust above the £325,000 nil-rate band triggers an immediate 20% IHT charge on the excess value at the point of transfer.
Once your home is held in a trust, you lose eligibility for the £175,000 residence nil-rate band (£350,000 for couples). This typically increases your family's eventual IHT bill rather than reducing it.
Trusts holding property are subject to IHT charges of up to 6% of the trust's value every ten years, plus exit charges when assets are distributed.
Once transferred, the property legally belongs to the trust. Your trustees, not you, control it. You could be required to move if circumstances change.
Local authorities can treat assets transferred into a trust as "deprivation of assets" and still include them when assessing care home fees.
The transfer may also trigger capital gains tax complications when the property is eventually sold.
For most homeowners, making a proper will and using the residence nil-rate band directly is far more tax-efficient than a trust arrangement.
Transferring property into a discretionary trust above the £325,000 nil-rate band triggers an immediate 20% IHT charge on the excess value at the point of transfer.
Once your home is held in a trust, you lose eligibility for the £175,000 residence nil-rate band (£350,000 for couples). This typically increases your family's eventual IHT bill rather than reducing it.
Trusts holding property are subject to IHT charges of up to 6% of the trust's value every ten years, plus exit charges when assets are distributed.
Once transferred, the property legally belongs to the trust. Your trustees, not you, control it. You could be required to move if circumstances change.
Local authorities can treat assets transferred into a trust as "deprivation of assets" and still include them when assessing care home fees.
The transfer may also trigger capital gains tax complications when the property is eventually sold.
For most homeowners, making a proper will and using the residence nil-rate band directly is far more tax-efficient than a trust arrangement.