Asset Protection Trust

Asset Protection Trust

An Asset Protection Trust also known as a Lifetime Discretional Trust or Living Trust allows you to leave your family the majority of their inheritance in Trust, ensuring it goes to them and not to someone else or another institution.

The Trust acts like a safety deposit box, where you can put your house and other financial assets. Setup whilst your alive it will protect those assets from future threats and when you die the trust is then transferred to your chosen beneficiaries.

The trust is created whilst your alive in your name so you own the trust. The assets are still yours, unlike transferring to relatives, you remain in control. You are the owner of the Trust and you are also a trustee and beneficiary of your own Trust.

The Trust can do everything you can as an individual. You can still sell, move and invest. You remain in control of your assets.

Asset Protection Trust offers a number of benefits for your estate:

Probate Benefit – For any assets held in trust, there is NO need for probate. With the average cost of probate being 4% of the estate the trust offers a significant saving, not only in terms of money, but in actual time and effort it saves for loved ones at a stressful time. With probate taking on average 6-9 months to complete, assets held within trust are normally transferred within weeks.

Care Benefit – If a person is taken into care then, under the Community Care Act 1990, the local council have the right by law to seize their home, sell it and use the proceeds to support their long-term care costs, leaving only £14,250. This could mean there could be very little of their estate left for their family. Assets held within Trust are disregarded during the care fees means assessment. In order for local authority to successfully contest the Trust they have to prove the client deliberately deprived themselves of assets in order to avoid paying for care. As long as you are reasonably fit and healthy when the Trust is setup the Local Authority can’t assume that avoiding paying for care was the purpose.

Relative Claims – If a dependant relative does not consider that they have been adequately provided for in the will, they could claim against the estate. The will could be ignored and they could benefit. Unless “reasonable provision” has been made in your will for children and some other relatives, the courts could, overrule and the will and distribute your estate against your wishes. This could also mean whilst this is being resolved none of your beneficiaries are unable to inherit for potentially years and considerable cost. Placing your assets in Trust could avoid this and ensure only your named loved ones inherit.

Remarriage – Assets held within Trust are protected from remarriage. Incorporating a Protective Property Trust along with an Asset Protection Trust If the deceased’s spouse remarries, the inheritance would not pass to another family, missing out the deceased’s children.

Inheritance Tax – Often when an inheritance is left to children they create an inheritance tax problem for them. The Trust enables the parents to pass on the inheritance without creating any inheritance tax liability. Assets held in Trust will not form part of the beneficiary’s estate so will not attract inheritance tax issues.

Inheriting at The Wrong Time – When the time comes it may not be the best time for your beneficiaries to receive their inheritance foe the following reasons

  • Divorce – Their spouse would be entitled to 50% share of the inheritance
  • Bankruptcy – Inheritance would be used to fulfill commitments to creditors
  • Benefits – Support lost or reduced
  • Disabled beneficiaries – The inheritance could be squandered and they could be taken advantage of.
  • Drug or alcohol dependency -With the assets being held in Trust they would be controlled by the trustee’s choosing when to inherit still allowing them to benefit from their inheritance.

An Asset Protection Trust will protect your assets and estate for future generations of your family to enjoy; whilst critically allowing you full control over the trust (and thereby those assets placed within it) during your lifetime.

Trusts are a part of everyday life now, widely used by individuals and organisations alike (think NHS Trusts, School Trusts etc) to protect their assets for the future.

You can ensure that all your assets and estate passes to the family members of your choosing – without the costly and lengthy probate process delaying your family’s inheritance.

Frequently asked questions

Can I move house?

Yes, since you and the trustees you named control the trust you can move house in the normal way by simply selling the property and purchasing a new property and keeping it within the trust.

What happens if one of us dies?

The trust, and the protection it provides, simply continues as before until the 2nd person dies. The survivor and the other trustees continue to retain control of the trust.

If I’m single and have a trust what happens after I die? – Your trustees can carry on the trust if needed or dissolve it to pay your named beneficiaries.

What happens if one of us becomes incapacitated?

The remaining Trustees simply continue to manage the trust.

Can I change my trustees of my Asset Protection Trust?

Trustees can remove and appointed by the settlor of the trust as long as they have mental capacity.

Do I still need a will if I have a Asset Protection Trust?

Yes a will outlines what you want to happen to your estate and a Asset Protection Trust ensures it happens.

Do I need a Asset Protection Trust?

This completely depends on your estate and your circumstances. A lot of our clients put a Asset Protection Trust in place for peace of mind and to ensure that their estate is in order should anything happen to them removing the need for probate protecting their loved ones.

Can I put my assets in a Asset Protection Trust to avoid paying for my care?

No this is deliberate deprivation of assets. However, if the Asset Protection Trust is setup at a time when care is unforeseeable for the correct reasons this could also be a benefit.