Can you trust a Trust?

Have you got an asset preservation trust? Maybe you know it as as an asset protection trust, family protection trust, or flexible trust? Are you tempted to invest in one? If yes, it might be wise to review it, urgently!

You might have seen reports about the mis-selling of these schemes. Indeed, we have dealt with a few such cases over recent years.

This article explains more. Remember, we’re always happy to help if you have any questions.

protection trusts, on the understanding that the scheme will help reduce inheritance tax (IHT) and protect the family home from being sold to raise care fees.

The Trusts typically cost £3,000-£5,000 to set up. However, most of them do not provide any guarantees, and are not necessary to achieve the clients’ objectives. Instead, families end up with unexpected tax bills, legal disputes, family conflict, loss of access to their property, and emotional distress.

The Association of Lifetime Lawyers recently conducted a survey of 100 of their members, and found:

• 95% of law firms who responded reported an increase in mis-sold asset protection schemes, especially in the past 12 months
• 90% of schemes are set up by unregulated and uninsured providers, with four in five firms appointing themselves as trustees
• 82% of their clients had wrongly been told the Trust would protect their home or reduce IHT

One problem is that these schemes are sold to vulnerable older people such as retirees or those nearing retirement – people who have built up significant equity in their homes.

Also, they are marketed as ‘quick fix’ solutions, using fear-based tactics and time pressure. There’s no proper documentation or explanation provided.

What’s more, the Trusts are expensive. However, clients only get templated documents which mask the complexity and risks involved. Finally, the Trusts can be difficult to get out of (although we can help with that if you find yourself in that situation). 

These schemes don’t provide protection – rather, they are a trap!

To protect the public, Lifetime Lawyers are calling for a public enquiry, to increase regulation to close loopholes, and to raise awareness. It’s a consumer protection issue, so we’re doing our bit to spread the word in this article. We hope it helps you and people you care about.

Note that not all Trusts are bad for your financial planning. What you need is bespoke legal advice that’s tailored to your circumstances – and that’s what we provide here at Harrisons.

Top tips for Trusts

• Use a regulated legal professional (like us)
• Get the risks, alternatives and limitations in writing
• Understand the role of the trustees
• Understand the fees and legal terms
• Don’t make a decision under pressure

We’re Accredited Lifetime Lawyers. As such, we are experts in helping people with later life planning. For more information, please call us on 01938 552545 or visit out page on Wills, Trusts & Tax Planning. 

P.S. You can hear a live interview with Jade Gani about this subject on the BBC Radio 4 Money Box programme broadcast on 20 September. Listen here from 00:22 to 08:43.