Trust Schemes that sound too good to be true…
In this blog, Charlotte Macalister, of Band Hatton’s Wills, Trusts & Probate Department, discusses how some trust scheme sales pitches may be misleading the elderly.
You may have seen in the press that some companies have been advising clients to put their assets into trust to avoid paying care home fees and/or inheritance tax.
These types of trusts are marketed under various names (such as Family Protection Trusts, Asset Protection Trusts, Property Protection Trusts and Bloodline Trusts), however, generally they have the same underlying purpose (i.e. to safeguard wealth from the Local Authority and the Revenue).
These schemes are often made to look very appealing, however the saying ‘if something sounds too good to be true it usually is’ springs to mind. The reality is that a fantastic sales pitch, a thought provoking seminar and a glossy brochure on adding assets into a trust is not a guarantee of protecting family wealth.
Sadly, it is the elderly that are usually victims of being mis-sold these types of trusts. They are not advised properly on the intention for creating the trusts, the risks associated with these types of trusts or the tax consequences, and are less likely to look at the reviews on Google of the company they are instructing.
The Local Authority can overturn any gift into a trust if they can prove a ‘deliberate deprivation of assets’. If they succeed in proving this, the person can be treated as still owning the capital of which they have deprived themselves regardless of whether it can be claimed back or not.
You have may read in the news that a big provider selling these services has closed down recently and this has caused problems for many of their clients. There has been a recent broadcast on the Money Box show on BBC Radio 4 discussing it, and a great deal of concern has been shown on the Money Saving Expert Forum.
When trusts like this are created, the person’s main asset is often the subject of the trust and this is usually their house. When a house is placed into trust, the legal ownership changes and the Trustees become the registered legal owners with the Land Registry. We are aware that this company in particular appointed themselves as Trustees and this may not be something people expect or are generally aware of. If you find yourself considering this type of trust, ask yourself the question – ‘are you happy for your assets to be held in someone else’s name?’.
If you do not know the whereabouts of the Trustees then it is going to be very difficult to sell your property as their signatures will be required to sell the property. This is something you should try and resolve during your lifetime to avoid your beneficiaries trying to untangle the messy situation upon your death.
The companies that sell these types of trusts often charge an extraordinarily high fee and this is normally a lot higher than what a Solicitor’s firm would charge (often several thousand pounds). If you are thinking of putting your home into trust because you wish to avoid paying care home fees or to avoid paying inheritance tax or if you find yourself in this difficult situation, then please get in touch.
All five lawyers in our team are members of the Society of Trusts and Estate Practitioners (STEP) and also fully qualified and accredited members of Solicitors for the Elderly (SFE).
Band Hatton Button LLP are regulated by the Solicitors Regulation Authority.