The purpose of an asset protection trust is to ensure that your assets are distributed according to your wishes after your death. You establish an asset protection trust during your lifetime, and its assets are immediately allocated to the beneficiaries upon your death. Asset protection trusts are a type of life interest trust, although they overlap with trust wills because the trust is designated in your will. In this article, Do Asset Protection Trusts Work in 2023, we take a look at these issues in more depth.
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For a free initial discussion with a member of our New Enquiries Team, get in touch with us today. We are experienced in dealing with all the legal aspects of Asset Protection Trusts and once instructed, we will review your situation and discuss the options open to you in a clear and approachable manner. Early expert legal assistance can help ensure you are on the best possible footing from the start and also avoid the stress of dealing with these issues on your own. Simply call us on 0345 901 0445 or click here to make a free enquiry and a member of the team will get back to you.
Why do I need a trust to protect my assets?
The most frequent causes for establishing an asset protection trust are:
- To safeguard specific estate assets for beneficiaries, including vulnerable individuals
- To avoid the costs of administering the estate through probate
- To protect your beneficiaries against the possibility of future divorce or bankruptcy.
- To limit needless inheritance tax payments in specific cases
Capital deprivation
If the assets are in a trust, they are distinct from the assets of the surviving spouse. Theoretically, when the local authority uses its formula to compute the amount of long-term care payments due, the trust’s assets will not be included.
Therefore, the survivor is likely to receive increased state payments. However, you cannot establish a trust to avoid paying local authority care costs, which is known as “deliberate asset deprivation.”
If the local authority suspects, based on the circumstances, that long-term care was fairly foreseeable when the trust was established, such as if your or your partner’s health was already declining, they have broad discretion over what to do with the trust.
Their authority includes the capacity to access and evaluate the trust’s assets. Thus, there is a possibility that the house will need to be sold.
Note that if you intend to utilise an asset protection trust to lower your capital and avoid paying care fees or other creditors, there are measures in place to prohibit such transfers from being effective.
If you wish to reduce your exposure to care costs, you may choose to explore the use of a will trust, which provides your spouse with rights while safeguarding your portion of the estate in the event that your spouse requires care in the future.
What are the disadvantages of an asset protection trust?
Due to its complexity, creating an asset protection trust might sometimes incur expensive legal fees. We will always provide a clear breakdown of the likely costs before any work is undertaken. Additionally, you may incur continuing administration costs to maintain legal compliance. This can make them an expensive option for individuals with restricted funds.
A trust for asset protection may prevent you from accessing or using the assets it holds. This means that in the event of a financial emergency, you may not have access to liquid funds without the trustee’s permission.
Asset protection trusts are not failsafe, and assets placed in a trust may still be subject to creditor claims in certain legal scenarios. It is crucial to engage with an experienced lawyer who can ensure all legal criteria are completed and advise on any potential flaws that could undermine the security given by the trust.
What are the benefits of an asset protection trust?
Asset protection trusts offer extensive legal protection against creditor claims and judgements made against you or your business. This is especially useful when dealing with debt problems since it ensures that important personal and corporate assets are protected in the case of insolvency procedures.
When assets are placed in an asset protection trust, they are removed from the decedent’s estate, thereby reducing inheritance tax payments and simplifying the probate procedure. This is especially advantageous if you wish to safeguard family money, protect substantial property assets, or administer the estate of a deceased family member.
Additionally, asset protection trusts offer flexibility in asset management and distribution. Beneficiaries can be added or deleted at any moment, and trustees have complete control over when and where trust funds are distributed.
How we can help
We have a proven track-record of advising upon all aspects of private client work. We will guide you through the process and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.to incorporate, what kind of ownership
How to Contact Our Private Client Solicitors
It is important for you to be well informed about the issues and possible implications of setting up an Asset Protection Trust. However, expert legal support is crucial in terms of ensuring a positive outcome to your case.
To speak to our Trust solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
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