Asset Protection Trusts
With the closure of several firms that once sold Asset Protection Trusts, many people are now understandably worried about the Trusts they set up previously.
Unfortunately, if you established these trusts to avoid care fees or Inheritance Tax, you might find they don't offer the protection you hoped for. These Asset Protection Trusts might also come with unexpected tax consequences, including penalties and interest.
At Nash and Co, we provide advice tailored to your specific trust documents and personal situation. We'll help you figure out if there are any outstanding reporting obligations or tax liabilities and explore your options for your Asset Protection Trust. We can also assist in winding up the Trust and transferring any assets back into your name.
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What is an Asset Protection Trust?
An asset protection trust, often referred to as a home protection trust or wealth preservation trust, is often seen as a legal means of protecting assets from potential future risks, such as care home fees.
These trusts aim to ensure that specific assets, such as your home, are preserved for your intended beneficiaries and are not depleted by unforeseen circumstances.
However, in recent years, many people have been wrongly advised to set up an Asset Protection Trust without fully understanding the implications. If not properly structured, these trusts can lead to significant financial and legal complications, including unforeseen tax liabilities and restricted access to your assets.
Amy Douch, Solicitor in our Wills, Trusts, Tax & Probate team
What are the problems associated with Asset Protection Trusts?
Asset Protection Trusts can present several problems, especially when they are not fully understood or correctly implemented. Significant concerns can include:
Perceived Lack of Control: when assets are placed into a trust, control over them is transferred to the trustees, which can make some people feel uncomfortable
Deliberate Deprivation of Assets: if assets are transferred into a trust to avoid care home fees, authorities may view this as deliberate deprivation of assets during means testing, potentially placing the assets at risk. This refers to intentionally reducing the value of your assets to avoid paying for future care services, such as residential care.
Tax Liabilities: a poorly executed trust can result in unintended tax consequences, including liabilities for Capital Gains Tax, Land Tax, Income Tax, Stamp Duty, and Inheritance Tax
How can we help?
Nash and Co are very understanding of the difficulties many clients are now experiencing with trusts of this nature. We pride ourselves on helping clients and being transparent with our costs and the options available to clients.
We understand it can be daunting after the experiences many have had, to have to seek further professional advice from solicitors. We are happy to meet with you face to face, by video meeting or over telephone, to help you understand your situation and advise on the options available to you.
David Cornelius, Partner in our Wills, Trusts, Tax & Probate team
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Frequently asked questions
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An Asset Protection Trust is a type of trust that is designed to safeguard your assets while potentially mitigating tax liabilities. By transferring assets into an Asset Protection Trust, control is given to its trustees, though the original owner may retain some benefits.
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An Asset Protection Trust involves transferring ownership of assets to trustees, who manage them for the benefit of designated beneficiaries.
While the original owner retains some benefits from the assets, they relinquish direct control over the assets. The trustees are responsible for managing and distributing the assets according to the terms of the trust.
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Common issues associated with Asset Protection Trusts (APTs) often stem from improper setup or management by solicitors. These issues include:
Unknowingly Adding Trustees: some individuals discover that trustees were added to the trust without their knowledge or consent, which can lead to a loss of control over their assets
Solicitors Going Bust: if the law firm managing the trust goes bankrupt or closes their practice, it can cause significant complications in accessing or managing the trust assets
Failure to Register Trusts: in some cases, solicitors may have failed to register the trust, rendering it legally non-existent and leaving the assets unprotected
Misleading Advice: people may have received incorrect or incomplete advice about the benefits and risks of an APT, leading to poorly informed decisions
Tax Complications: inadequate planning and advice can result in unforeseen tax liabilities, including Capital Gains Tax, Land Tax, Income Tax, Stamp Duty, and Inheritance Tax
To mitigate these issues, it is crucial to work with reputable and experienced solicitors who specialise in trusts and estate planning to resolve these issues.
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The disadvantages of an Asset Protection Trust, particularly when poorly set up, can have significant negative impacts. For instance, if the trust fails to comply with legal requirements, or has not being correctly registered, it can result in unintended legal and financial consequences.
Perceived Lack of Control: when assets are placed into a trust, control over them is transferred to the trustees, which can make some people feel uncomfortable
Deliberate Deprivation of Assets: if assets are transferred into a trust to avoid care home fees, authorities may view this as deliberate deprivation of assets during means testing, potentially placing the assets at risk
Tax Liabilities: a poorly executed trust can result in unintended tax consequences, including liabilities for Capital Gains Tax, Land Tax, Income Tax, Stamp Duty, and Inheritance Tax
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The most obvious benefit of placing assets into an Asset Protection Trust is protection. Other potential benefits of creating an Asset Protection Trust include:
Avoid Probate: APTs ensure that your loved ones do not have to endure the lengthy and expensive probate process
Tax Benefits: properly structured trusts can offer potential tax benefits. Consulting an expert is recommended to understand these advantages
Future-proof Inheritance: an APT can safeguard your beneficiaries’ inheritance from negative situations such as divorce or bankruptcy
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If you have concerns about your Asset Protection Trust (APT), you should consider taking the following steps:
Get in Touch with us immediately: our team have years of experience dealing with estate planning and trusts and can help you to review your Asset Protection Trust, providing the necessary support and advice when it comes to effectively managing your assets. You can also contact the team directly by calling 01752 827067.
Review the Trust Documents: carefully read through the trust documents to understand its terms and conditions, clauses and appointed trustees
Evaluate its Setup: assess whether the trust was properly structured and registered as this can lead to significant legal and financial complications
Discuss with Trustees: discuss your concerns with your trustees. Trustees are responsible for managing the trust and can provide insight into its current status and management
These steps allow you to address your concerns and ensure that your future is managed effectively and in your best interests.
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Get in touch
Fill out the form below and let us know whether you would like us to call you, or email you. One of our Medical Negligence team will be in touch as soon as we can.
If your enquiry is urgent then please call us on 01752 827067.