A common question asked is whether a property can be placed into a Trust or transferred to children. The simple answer is yes. However, matters are not always that straightforward.

Transferring a property to children or settling a property into a Trust is a good way in which to ensure that the property will remain in the family after the owner has passed away. A Trust allows for the property to be managed and distributed in accordance with the owner’s wishes and helps protect the property from increased probate fees and administration costs.

It is also advantageous for ensuring control of the property and additional flexibility to accommodate any unexpected issues which may arise in the future.

However, a lot of the disadvantages with settling property into a Trust are similar to gifting your property to your children and the administration requirements should be considered for either. A concern would be that as a result of you no longer owning your property, you are not free to deal with it as you normally would. Should you require to act on the property (e.g. you wish for equity release, wish to move house or simply carry out repairs) you personally cannot simply act. This would require either the consent of the Trust to oversee these decisions or permission of the property owner (i.e. consent of your children if gifted to your children).

Gifting a property to a Trust is similar but slightly different to giving a property to your children or other individual directly. Some of the concerns noted with giving your property away are highlighted, however advice must be taken at the time to see whether settling a property into a Trust is the right option for you.

Although you may give your home away, the cost of maintaining the property is always an ongoing concern. Who is legally responsible for the bills and outgoings and who is intended to be responsible? As they may be two separate individuals or an individual and a Trust, care must be taken to consider how this would work in practice.

Whilst the day to day management of the Trust property is the responsibility of the Trustee, the Settlor can be a Trustee and therefore directly ensure that the Trust property continues to be managed properly in accordance with their individual wishes.

Placing a property into a Trust or gifting it to your children may not work should you be wishing to do the same to avoid paying for residential care in the future.

The deprivation of assets rules on the Isle of Man state that the Isle of Man Government can look back at such transfers and deem them to be a purposeful deprivation to reduce your estate for obtaining reduced care fees. If they do, your property will still be counted towards your capital and affect the funding that you are eligible for.

However, this does not prevent such action being taken if there are legitimate reasons (which are not care related) as to why you wish to place your property into a Trust now or gifting to your children now rather than gifting the same from your Will. An example could be to remove your obligations for the management of the property, for your individual estate or tax planning purposes, for administrative ease, or to protect assets for your beneficiaries should they be disabled or vulnerable.

Each individual is unique and trust creation is bespoke and needs to be specifically tailored to you.

If you wish to obtain advice in respect of the above, please contact one of M&P Legal's private client team, Patrick Swanney or Amelia Quinn on 01624 695800 or email pas@mplegal.im or ajq@mplegal.im.

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