At Kitson Boyce, our private client lawyers have experienced this first-hand. We have dealt with a number of clients who have come to us for advice after signing up for asset protection trusts without understanding the long-term implications. This highlights that you must seek advice before proceeding if you are thinking about protecting your assets, planning for the future, or are worried about inheritance tax. 

To help you navigate these findings, we have put together this article to dive deeper into the Association of Lifetime Lawyers report, explaining what a trust is, how an asset protection trust differs, and what you should do before making any big decisions. 

What is a trust?

A trust is a highly valuable tool in estate planning and can be set up during your lifetime or included in your Will. In short, it is a legal arrangement made when you transfer assets, such as your home, savings, or investments, to the control of a trustee. The trustee is legally responsible for managing those assets in line with the terms of the trust and in the interests of your chosen beneficiaries. 

For example, trusts are often put in place to protect assets for children or grandchildren until they are old enough to manage the money themselves.

What is an asset protection trust?

Asset protection trusts are often marketed as ‘family protection trusts’ or ‘home protection trusts’ and are schemes marketed as a way to protect your home from care fees or reduce inheritance tax. Whilst in theory a trust can be utilised to achieve these goals, the reality of asset protection trusts is often very different.

The Association of Lifetime Lawyers report has found that these promises are often misleading, with the report highlighting that:

• 95% of solicitors surveyed had encountered clients who had been mis-sold asset protection trusts
• In 90% of cases, the asset protection trust has been set up by an unregulated adviser
• Many clients had no inheritance tax liability at all, yet found themselves paying thousands of pounds for a trust they did not need
• Families and beneficiaries often only discovered the downsides of the scheme years later when trying to manage the estate following the death of a loved one

Are trusts always a bad idea?

These damning findings certainly paint asset protection trusts in a negative light, with those affected by misselling subsequently dealing with unexpected tax liabilities, legal disputes, and emotional distress. In the worst cases, individuals even lost access to their homes due to a lack of understanding about what they were signing up for.

However, this is not to say that trusts are always a bad idea. Trusts remain an important estate planning tool when carefully tailored to your circumstances and put in place by a fully qualified legal professional. The key is proper legal advice, which considers whether a trust is actually required in the individual circumstances, and then an assessment of which type is the most suitable. 

Setting up a trust

If you are thinking about how to best protect your assets, or if you are concerned about future inheritance tax liability, your first step should always be to take advice from a regulated solicitor. Stay clear of any asset protection trust company that cannot provide evidence of proper qualification or accreditation to a professional body, or any individual who applies pressure and uses emotionally manipulative sales techniques. 

At Kitson Boyce, our expert private client lawyers in Torquay, Plymouth and Exeter have the knowledge and experience required to help you consider a trust in the right way. We can help you understand whether a trust is actually necessary for your situation, and we will offer a clear explanation of the right arrangements with full clarity on costs, risks, and responsibilities. 

Our compassionate private client lawyers are also able to advise if you already have an asset protection trust in place and want to understand what it means for you and your family. 

For more information, please contact us online through the form below, via email at [email protected], or call us directly on 01803 202020 to speak to one of our private client lawyers about your possible trust requirements.