Alert! Misleading Asset Protection Trusts
We are concerned along with The Association of Lifetime Lawyers that some rogue traders are misleading clients into buying Asset Protection Trusts.
They are saying that in so doing they will eliminate inheritance tax.
Inheritance tax can only be eliminated if the assets are completely given away and no benefit is derived from the assets for 7 years.
Many people are being told they can put their property into Trust and this will avoid inheritance tax on it which is blatantly untrue.
Properly structured property Trusts can eliminate generational inheritance tax being charged on the same asset generation after generation through the use of loan notes, but to say that inheritance tax can be reduced or eliminated altogether on a home you are still living in is impossible (if you have not structured an arrangement whereby you are paying market rent for it) as that would then be a GROB - a gift with a reservation of benefit, and will not work.
Similarly, clients are not being advised about the rules surrounding deliberate deprivation of assets , which is where a Trusts are set up with the sole and overriding reason of avoiding care home fees or at a time when such care were a real possibility (after a diagnosis of dementia for example.)
There are plenty of valid reasons for setting up property Trusts, such as:
Ensuring that your children will inherit your half of the property should your surviving spouse remarry after your death;
To guarantee (again with the use of loan notes) that a child who divorces does not lose 50% of that which they have inherited from you;
To ensure that if a beneficiary goes bankrupt their inheritance os protected
and many more valid reasons besides, none of which are in of themselves deliberate deprivation of assets, but have the side benefit of meaning that the property in Trust will be outside of the scope of a Local Authority when they conduct their financial assessment should care be required.
Clients are also signing up for Trusts where they are appointing the company selling them as Trustees. This should never be agreed to. A couple should be the Trustees themselves and in the case of a sole owner the children or other trusted family members or friends should be considered for the role of Trustees.
Clients are being sold Trusts that have a limit upon how much can be held within them meaning that this will often create a negative tax event if the asset goes above the Nil Rate Band threshold (currently £325k per person)
Clients are also in many cases being charged between £4-£5k for these Trusts which is extortionate.
Our legally enforceable and guaranteed Property Trusts are just £2495 including v.a.t, your family remain in control as Trustees at all times and we will always discuss deliberate deprivation of assets with you to ensure you are not going to fall foul of this rule and ensure you are fully aware that they are NOT inheritance tax mitigation vehicles on your own estate and, our bespoke Property Trusts, because of the way they are structured, have no limit on the amount that can be held within them meaning your property can grow in value and you do not need to worry about tax issues as a result.
We thoroughly support all efforts at weeding out such irresponsible companies and would encourage anyone considering one of these Asset Protection Trusts, speak with ourselves before agreeing to anything.
Trusts can and most certainly do have their place in protecting the family so to dismiss them altogether is not correct, however, but they must be fully explained and understood and no-one should ever appoint a company as a Trustee over their property.