What can I do if I have a Family Protection Trust prepared by McClure Solicitors?

Emily Welch, Solicitor in our Private Wealth Disputes team in London, writes about the McClure Solicitors trusts we help clients with, and the issues faced.

Background

Historically, McClure Solicitors promoted Family Protection Trusts to individuals as an estate planning option, with the firm (or their directors) being appointed as trustees. Shirley Houlihan and Andrew Robertson were two solicitors at the firm, and they often appointed themselves as professional trustees.

McClure Solicitors entered administration in 2021, and Jones Whyte LLP took over many of its client files, including over 18,000 Family Protection Trust files.

Unfortunately, many individuals are facing issues with the trusts and dealing with the assets held in them.

Regulators including the SRA and the Law Society of Scotland have launched investigations into the practice of McClure Solicitors. In addition, complaints about Jones Whyte’s handling of the inherited matters are under review by the Legal Ombudsman.

What is a Family Protection Trust?

Family Protection Trusts (also known as Asset Protection Trusts) are trusts set up by individuals (the settlor) and typically involve individuals transferring their home or other financial assets to the trust during their lifetime.

The trusts were marketed as a solution to inheritance tax, care home fees and probate delays. Despite being sold with the promise of asset protection, the trusts can often fail to deliver the anticipated benefits.

What issues are there with Family Protection Trusts?

There are several potential issues with Family Protection Trusts that individuals may face. These include difficulties with:

• Dealing with the trust assets: The most common issue that clients can face is dealing with the assets held within the trust, which is usually their home. This is because the name of the trustees, which may be historic directors of McClure Solicitors or the WW & J McClure Trust Corporation Limited, are often recorded on the register of title for the property held in trust. This means it is not possible to sell the property without the trustees’ consent. Difficulties then arise when these trustees refuse to engage or assist, and further complications could arise if any of the trustees were to die.

• Contacting the professional trustees: Clients have also reported difficulties with being able to contact the professional trustees to obtain information or seek assistance with the trust, as they do not hold contact details for them. We have historically been able to liaise with Shirley, Andrew and other appointed professional trustees to gather this information and seek assistance on behalf of clients.

• Unexpected tax liabilities: Inheritance tax may be payable on trust assets, despite how the trusts had been marketed. This tax could be triggered even within the settlor’s lifetime. Sadly we often find that this advice was not provided to clients when the trust was created, leading to potential inadvertent and unexpected tax liability.

• Ensuring the trust obligations have been complied with correctly: Since October 2020, all taxable trusts need to registered with the Trust Registration Service. Many lay clients are not aware of these obligations, and it is difficult to undertake such steps while professional trustees remain appointed, due to the contact and engagement required.

What steps should I take to resolve these issues?

There are several steps that can be taken to resolve potential issues with Family Protection Trusts or bring the trust to an end if it is no longer appropriate.

If you, or someone you know has concerns about a Family Protection Trust, then you should seek early legal advice on the steps that can be taken. These key steps, and steps that we can assist with, are:

1. Replacing existing trustees (i.e. the former directors of McClure solicitors) if appropriate;
2. Updating the register of title for the property/ies held within the trust;
3. A review of the trust deed and arrangements and advice on winding up or varying the trust if it is no longer appropriate; and
4. Ensuring compliance with trust registration;
5. Advice on the taxation implications for the trust; and
6. Updating any will or other estate planning documents accordingly, if required.

We are a team of specialist lawyers who deal with resolving trust issues. In addition, the full range of services our firm can offer means that we can continue to assist you with the preparation of any legal documents that may be required to effect the changes you wish to make, as well as to deal with any conveyancing work that may arise as a result of any property that may form part of the trust.

(Please note that while we can offer advice in respect of any trusts set up by McClure Solicitors, we are not associated with either McClure Solicitors or Jones Whyte LLP and do not hold their files)