Asset protection trusts are also commonly referred to as home protection trusts, or wealth preservation trusts.
By transferring assets (property) into trust you will no longer own that property, however it can still be possible to retain rights over these assets.
Why do I need an asset protection trust?
The most common reasons for setting up an asset protection trust are:
- To protect certain assets of the estate for beneficiaries, including vulnerable beneficiaries
- To avoid the costs of probate in administering that asset on death
- To protect against the potential future divorce or bankruptcy of your beneficiaries
- In certain circumstances, to limit unnecessary inheritance tax payments
Protecting your estate for your beneficiaries
By setting up a trust in your lifetime, you can have peace of mind that you have provided for your beneficiaries. For example, you might have children from a previous relationship, or be concerned that your spouse might remarry. An asset protection trust can set in stone who will inherit the asset on your death.
If you have a vulnerable beneficiary, such as a child with disabilities, the use of a trust could help protect them from financial abuse and from losing their right to means tested benefits.
Avoid the costs and time delays of probate
Probate can be an expensive and time consuming process. By placing assets in trust, a grant of probate will not be required to administer that asset on death. As a result the assets held in the trust can be dealt with quickly and efficiently, saving your beneficiaries’ time and money.
Protect from potential divorce or bankruptcy
No one knows what the future holds for our children. Should they face a potential divorce or bankruptcy in the future, then having their inheritance in the form of an interest in a trust offers potential protection from third parties.
Avoid unnecessary inheritance tax
If you are able to give up your interest in the assets you place in trust then those assets will not form part of your estate for inheritance tax purposes (assuming you survive seven years thereafter). You can still retain control by acting as a trustee, giving you the chance to oversee the safe management of assets for vulnerable beneficiaries.
Deliberate deprivation of capital
It is important to note that if you intend to use an asset protection trust to reduce your capital, and avoid paying care fees or other creditors, then there are anti-avoidance provisions in place to prevent such transfers being effective.
If you would like to consider ways to mitigate your exposure to care costs, you might consider the use of a will trust, providing rights to your spouse whilst protecting your share of the estate in the event that your spouse needs care in the future.
If you want to find out more about asset protection trusts, or how to protect against care costs by using will trusts, contact our team today for a free initial telephone conversation. Call 01752 203500, emailenquiries@GAsolicitors.com or use our online enquiry form.
