What are you looking for?

4 June 2015 | Comment | Article by Matthew Evans

The potential dangers of asset protection trusts


Asset Protection Trusts are widely advertised as the perfect one-size fits all solution to protecting the value of your home from all kinds of potential traps and pit falls. They are intended to ring-fence your estate from possible future divorce or bankruptcy of your beneficiaries or the looming threat of care home fees. Many providers advertise that you can avoid paying care home fees or protect the value of your property from the local authority if you need to go in to care.

Earlier this month eight members of an ‘estate planning company’ were sentenced for offences including fraudulent trading. The eight individuals ran an organisation under various trading names, and held themselves out to be qualified legal advisers. They weren’t legally qualified but offered to carry out estate planning activities including drafting wills, lasting powers of attorney and executing trusts intended to avoid paying care home fees. Over the course of two years the group took more than £250,000 in up-front fees and only delivered on a handful of products.

The group posed as qualified legal advisers and highlighted their offering of Asset Protection Trusts, also referred to as Family Protection Trusts or Estate Preservation Trusts. When the people they targeted said they were unsure about paying the costs up-front (in the thousands of pounds) they were subjected to high pressure tactics, being told they would be charged for future visits and that the seller’s own parents or grandparents had entered into these agreements and would endorse them. Crucially, those clients were also told that the trust arrangements were risk free.

The vast majority of people who need residential or nursing care are required to pay for the cost of that care, in full or in part. Around the time of entering a care facility, a financial assessment will be carried out by the local authority, requiring details of all assets (cash, investments, property) and income (pension, benefits, earnings) that you have at the point of entering care. If you refuse details, you will be deemed to have enough assets that you can pay for the cost of your care in full.

When assessing your financial circumstances, the local authority can ask for more information and can look back through your past dealings. If the local authority believes that you have deliberately deprived yourself of an asset in order to avoid paying care home fees (known as deliberate deprivation of assets), then you can be treated as though you still own that asset or, under new legislation, the local authority can attempt to recover the asset from the person to whom you have transferred it.

The vast majority of people who handed over money to the eight people now convicted of fraud did not receive what they had paid for. However, even if they had, it would be very difficult to say with any certainty that the trusts would have had the intended effect. There was a very real risk that, having paid thousands of pounds for the trust arrangements which put their property into the names of their children or a trust corporation, those individuals would still be required to pay in full for the cost of their care

If something seems too good to be true, it probably is, and if it was really that simple wouldn’t we all be doing it?

Author bio

Matthew is a partner and heads up the firm’s private wealth offering. He is responsible for the development, implementation and long-term strategy of the team.

Matthew has a UK-wide reputation in the field of contentious probate, recognised by his clients and peers in the leading legal directories.

Contact one of our experts

Fill in the form and one of our experts will get in touch with you shortly.