Trusts and Asset Protection

Family Trust Asset Protection

Our lawyers specialise in family trusts and asset protection in England and Wales, helping families to secure wealth and property for future generations. Whether you wish to protect your family home or other valuable assets, setting up the right type of trust can help ensure that your wealth is preserved and distributed according to your wishes.

Providing for your loved ones is one of life’s most important goals. However, relying solely on a Will or gifting wealth during your lifetime can be inefficient and, in some cases, risky. Assets may become vulnerable to inheritance tax, claims from creditors, or disputes between family members. Additionally, people often worry about how future care needs might affect their estate.

A properly structured trust can provide significant protection. It can ring-fence assets, make them available to your chosen family members or beneficiaries when needed.

Why Set Up a Trust?

A trust is a legal arrangement that allows you to transfer assets into the care of trustees who will hold and manage them for the benefit of your chosen beneficiaries. These assets are known as trust property and can include cash, investments, property, or other valuables.

With the right advice, a trust can be a flexible and tax-efficient tool for estate planning. Common reasons for setting up a trust include:

• Protecting assets for family members who cannot manage them – If a family member is too young, financially inexperienced, or unable to manage assets due to health reasons, a trustee can manage the trust and distribute funds when needed.
• Shielding assets from creditors or divorcing spouses – Business owners and professionals often place assets into a trust fund to protect them from future risks.
• Supporting vulnerable beneficiaries – In some cases, placing assets into a trust can help ensure that a person with a disability or complex needs continues to receive appropriate support without unintentionally impacting their eligibility for means-tested benefits.
• Inheritance tax planning – Certain types of trusts can help minimise inheritance tax liabilities, ensuring more of your estate passes to your loved ones rather than HMRC.
• Providing for blended families – Trusts are often used to ensure that both a surviving spouse and children from a previous relationship are looked after.
• Charitable giving – A charitable trust can be created to leave a lasting legacy to a cause close to your heart while benefiting from tax relief.
• Care fees planning – While trusts cannot be used to deliberately deprive assets to avoid paying care fees, they can still form part of a wider, legitimate estate planning strategy.

Types of Trust

There are various types, each designed for different purposes:

• Discretionary Trusts – Trustees have full discretion on how to distribute income or capital, giving flexibility to adapt to changing circumstances.
• Interest in Possession Trusts – Beneficiaries have the right to receive income from the trust property, while the capital is preserved for future beneficiaries.
• Bare Trusts – Assets are held by trustees but the beneficiary has an absolute right to them at a specified age.
• Charitable Trusts – These are established to benefit a charity or charitable cause, offering tax advantages.
• Life Interest Trusts – These are commonly used to provide for a spouse during their lifetime, with the trust assets then passing to children or other family members.

Our team will work with you to identify which type is most suitable for your needs, ensuring it aligns with your long-term goals and complies with trust law.

The Role of Trustees

When you set up a trust, you choose the people who will look after your assets; the trustees. Trustees have a legal responsibility to manage the trust and act in the best interests of the beneficiaries. It is vital that you appoint a trustworthy trustee as they will have the authority to make decisions about the trust property, including investments, distributions, and compliance with tax rules.

A trust deed is prepared to set out the rules, the powers of the trustees, and how assets should be managed or distributed. The trust deed is the legal foundation of the arrangement and must be drafted carefully to avoid disputes or tax pitfalls.

The Risks of Using a Trust to Avoid Care Fees

Many people consider using trusts to avoid care home fees. Although a trust can be used as a legitimate way to protect assets, it must be done correctly. If a local authority believes that you have set up a trust as a means of deliberate deprivation of assets, i.e., deliberately moving wealth out of your name to avoid paying care fees, they may still assess the value of those assets as part of your estate.

Our team can provide clear advice on how trusts interact with care fee assessments, ensuring that your planning is both effective and compliant with the law.

Real Estate and Trust Property

Trusts are often used to hold real estate, such as a family home or investment properties. Placing property into a trust can offer benefits such as:

• Protecting the property from potential claims or financial risks.
• Ensuring that the property remains available for future generations.
• Providing for a spouse or partner to live in the property for life while preserving its value for children or other beneficiaries.

Managing real estate within a trust requires careful consideration of tax implications, maintenance responsibilities, and rental income. Trustees must ensure that all decisions regarding trust property are made in the best interest of beneficiaries.

Tax Planning and Trust Funds

A trust fund is not just for the wealthy, it is simply a term for the assets held within the trust. These assets can include cash, investments, and property. Effective tax planning is essential to ensure that the trust is structured in a way that minimises inheritance tax and other liabilities.

Different types are taxed differently, so it is crucial to get expert legal and financial advice. Our team will guide you on the most tax-efficient way to transfer assets into a trust and ensure compliance with all HMRC requirements.

Why Choose AFG Law?

Our experienced team has in-depth knowledge of this area of law. We understand that each family’s circumstances are unique, which is why we provide tailored advice that reflects your goals, whether that is protecting your family home or planning for the next generation.

We can help with:

• Drafting and reviewing your trust deed.
• Advising on the selection of trustees.
• Ensuring your trust is set up to comply with legal and tax requirements.
• Ongoing support to help trustees manage the trust property effectively.

If you wish to protect your assets and ensure your family benefits for years to come, contact our team today. Get in touch today to find out how we can help with trusts and asset protection. Our team can also assist with wills and probate.