Lifetime Property Protection Trust

A client forwarded to me some basic information on a lifetime property protection trust being hawked by a firm as an antidote to care fees. After putting the client in touch with a reputable solicitor I should have promptly deleted the material but then curiosity got the better of me. In the interests of friday fun thought I would bring the tax claims here as I was confused.
The claims are:

  1. Main residence placed into Trust. (Does not state who the beneficiaries are but as the settlor continues to live in the property the settlor has to be included).
  2. The transfer in does not create a tax charge. (No caveat re value being below nil rate band)
  3. There are no trust ten year charges.
  4. On death the property still forms part of your estate for IHT.

The only trust I can see all these steps working for is a bare trust as both a Discretionary and Life Interest would trigger a chargeable lifetime transfer and be relevent property. But are the local authority really so easily bamboozled by a bare trust arrangement given you are still legally beneficially entitled to the asset? The claim that as the Trustees now own the property it cannot form part of your assets for care fees assessments suggests this is not a bare trust as the Trustees in a bare trust are not legally beneficially entitled to the underlying assets. They are nothing more than caretakers. Am i missing something?

The simpler answers may be that points 1-3 are just wrong or they are only meant to market these to people with properties under the nil rate band (and don’t mention the caveat in the marketing literature).

I agree with Andrew. From my experience, most of these lifetime trusts are designed for clients whose properties are worth less than the NRB and where the RNRB is not required. That would deal with points 1-3 above.

I know there are trust deeds which contain both a discretionary trust and a bare trust element the main purpose of which is indeed to bamboozle the local authority whereby it appears that the entire property is held in a “discretionary settlement” but, in fact, the discretionary trust element only holds up to the NRB with the bare trust element holding the balance.