Using a trust to protect your assets

In later life, many of us are keen to ensure our home and other assets are not sold to pay for care, should the need arise. A growing number of people are also keen to protect their estate from inheritance tax, probate fees and claims from creditors or ex-spouses. Essentially, they wish to preserve their assets for their family when
they die. One way to do this is by using a trust to protect your assets.

The theory being that by putting your house into trust and naming someone (for example, your children) as the trustees, you are no longer the owner of your home. As a result, should you require care, the assets in the trust will not be used in a local authority care funding means assessment.

Be aware of the drawbacks

Using a trust to protect your assets might seem like the perfect plan to protect your family’s inheritance. However, with a subject as emotive as the family home, it is hardly surprising that there are unscrupulous firms operating in the market of so-called “Asset Protection trusts”. These companies promote the idea that transferring all your assets to a trust during your lifetime is a great way to protect them. They do not always explain the potential tax consequences and the impact that giving up all of your rights to your assets can have on your future financial security. Nor do they make it clear that the local authority are increasingly investigating asset protection trusts. They can ignore the trust, treating the assets as if you owned them, if it can be shown that you put them into the trust as an act of “deliberate deprivation” to avoid having to pay for your care fees. There is a common misconception that this only applies for the first seven years after setting up the trust, but in fact there is no such time limit.

It is therefore important to understand that using a trust to protect your assets isn’t always straightforward and that assets are only protected from local authority means assessment if they are transferred to a trust at an appropriate time, for an appropriate reason. There have been many concerns over the years that some claims made by those marketing the arrangements mentioned above are misleading and whether they are indeed shams. Furthermore, some promoters have acted illegally. In 2015, eight people received prison sentences at Nottingham Crown Court for mis-selling the so-called asset protection trusts to elderly clients. More recently, the director of Universal Wealth Preservation (UWP) was jailed for eight months in December 2018, the company and its subsidiaries have gone into compulsory administration. It is thought that they may have had as many as 8,000 customers, many of whom are unable to access their money or sell their own homes.

How we can help

If you have already transferred your home into a trust and are worried that you did not receive appropriate advice at the time or are considering appropriate ways of passing your assets onto your family and might be interested in the possibility of using a trust to protect your assets, it is important that you speak to an expert and get advice as soon as possible.

The Financial Conduct Authority does not regulate trusts or Will-Writing.

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