Our Director Stewart Moore responds to the negative publicity surrounding Family Protection Trusts or Asset Protection Trusts
Read his article below.
1. Family Protection Trusts or Asset Protection Trusts don’t work
We often hear this statement from other Will-writers, solicitors, legal services companies and anyone else who professes to have an opinion (qualified to do so or not) on the subject. The fundamental error in this statement is that it starts with the assumption that the reason the Trust was set-up in the first place was to avoid long-term residential care fees. As we all know, assumptions are a dangerous thing. There are many reasons (which we explain in depth in other areas of our website) why our clients decide to arrange their estate and affairs through the set up of a Family Protection Trust. These reasons do not include the avoidance of residential care fees.
But why is this important? It’s important because the intention of a client in setting up their Family Protection Trust is paramount in the underlying legislation and the consideration that Local Authorities have to evaluate if indeed a client with a Family Protection Trust requires long-term residential care in the future. If it can be shown that the client’s intention (significant purpose in terms of the relevant legislation) in setting up their Family Protection Trust was not to avoid long-term care then the Local Authority cannot assume that it was indeed for care avoidance purposes.
However, for couples it is completely permissible to avoid one spouse’s share of the joint estate being used to pay for their spouse’s long-term care provision. Our Family Protection Trust covers this scenario.
And for all the other benefits of the Family Protection Trust the avoidance of care is simply not relevant. Our Family Protection Trust works for all those reasons.
2. Are Asset Protection Trusts the next mis-selling scandal?
It is true that Asset Protection Trusts can be mis-sold. It’s easy for unscrupulous advisers (or simply mis-informed advisers) to make bold claims that by simply transferring your house to an Asset Protection Trust will mean that you will avoid having to sell the family home if you were to go in to long-term residential care in the future. And it’s true to say that there have been unfortunate incidents of this occurring. As explained above, the rules around the payment of long-term care fees are far more complex than that. It is right that people should be wary of bold claims or guarantees of “success”. That’s a certain indicator that the adviser they have spoken with doesn’t fully understand the rules in this area. If something sounds too good to be true then it usually is!
That’s why it is imperative that if you are considering arranging an Asset Protection Trust or Family Protection Trust it pays in the long-term to use a specialist in this field. We go on below to explain why that should be McClure Solicitors.
3. There are other, usually cheaper, ways to address protection of assets from care home fees?
Again, this line of argument starts from the assumption that the rationale behind a Family Protection Trust or Asset Protection Trust is to avoid paying for long-term residential care fees. Most of the benefits of a Family Protection Trust can only be achieved through a discretionary Trust set up and administered during the client’s lifetime.
Discretionary Trusts set up in someone’s Will mean necessarily that they only take effect once the client has died. There can be no lifetime benefit by definition!
We often hear that Will Trusts are a legitimate and successful way of achieving similar outcomes and it is true that there are some benefits in this approach however, these benefits usually only apply if they are set up as part of a couple and can only by definition protect the deceased’s half of the estate – so they are only 50% effective in that regard. There’s also a large misunderstanding in the industry around the extent of that benefit, particularly surrounding the value of a half share in a property which derives from case-law. In simple terms, do not place a whole lot of confidence that a half share of a house has zero or negligible value. This is only true in unique, particular circumstances that will not apply to most people’s property.
The other “technique” which we still often hear (although thankfully increasingly discredited) is that the way to avoid paying for care home fees is to transfer your property into the names of your children. Without being too frank about this, this is terrible advice. You lose control of your property and, unless your children live with you in your property, you pass a capital gains tax issue on to them. With no good justification therefore for transferring the title to your property to your children, if you do go in to long term care, Local Authorities will challenge the reason for doing so and will always be successful so this is a “technique” that does not work for avoiding care home fees!
4. Why use McClure Solicitors?
The unfortunate truth is that too few professionals actually fully understand the rules and their interpretation in this specialist area of law because it doesn’t form the main area of their practice. It is our main area of expertise however. We developed the concept of the Family Protection Trust (or Asset Protection Trust) back in 2002 and have built our business on providing the right service and support to our clients. As a result, the Institute of Professional Will-writers have described us as the “best in the market”. Arranging a Family Protection Trust is an important decision for clients to take and therefore it’s not something that should be left to others who do not fully understand this area. It can make the difference between success and failure so why take that chance?
To find out more on our Family Protection Trusts click here.