Asset Protection Trust

1. You could do nothing and hope for the best. This is not what we would recommend.
2. You could transfer your assets to your family. By doing this you may protect your assets but you lose control. There are many things that can go wrong with this; your family may have to pay Capital Gains Tax on the asset, they may get divorced or go bankrupt, or simply fall out. Again, this is not what we would recommend.
3. Or you could transfer your assets including your house into an Asset Protection Trust. This allows you to have total control over your assets and helps protects them.

• A Doctor, in conjunction with the family, will decide whether you need long term care.
• If you need nursing care, the Council must arrange for the care and they must pay for it.
• The council has the right to try and recover these costs and they may try to do this. It is more difficult for them to recover costs as the assets are no longer in your name, but in the name of the Trust. The Solicitor Trustees will always deal with the Local Authority and respond to any challenge. The CRAG Report (Charges for Residential Accommodation Guide) states that ‘it would be unreasonable to decide that deliberate deprivation had taken place if the deposit took place when the claimant was fit and healthy and could not have foreseen the need to move into residential accommodation’. Therefore the sooner a Trust is set up the better.
• The Council will fund your care up to their maximum funding rate but the Care Homes normally settle for this amount instead of demanding the private rate.

Apart from care costs, the Asset Protection Trust has other big advantages. It will avoid Executry procedure on your death and save money. If most of your assets are in the trust then there will be no Executry Costs and your estate can be paid over to your beneficiaries without delay, usually within a couple of weeks. On death, estates normally cannot be paid out within the first 6 months, and can take up to two years to complete. Assets in a Trust are paid out immediately.

Even if you have a mortgage on your property which you do not want to pay off, then we can, in some cases, still set up a Assets Protection Trust, as long as the lender agrees.

Some commonly asked questions:

1. Why should I bother? You don’t need to do anything but if you do require care in the future it is likely that a large part of your assets, including your house, could be used for care costs instead of going to your family.
2. But family would look after me. Hopefully you will never need to go into care, but unfortunately 1 in 3 women and 1 in 4 men over 65 do go into care and so it can never be ruled out.
3. Is it worth it? If the scheme saves you thousands of pounds each year in care costs then it is obviously worth it.
4. What if I don’t go into care? It is still very much worthwhile as it will avoid the cost, delay and trouble involved in winding up your estate. If your house is still in your name when you die, then you will need a solicitor to carry out the executry procedure which can cost several thousand pounds. If however, the house is in the name of the Trust then the remaining Trustees can deal with the house immediately after death and thereby avoid the executry procedure altogether.
5. Why do I need a Solicitor as a Trustee? This is to ensure that you keep control. During your lifetime the Solicitor will always vote with you which means that you make all the decisions about the Trust and cannot be outvoted.
6. Why do I need two Solicitors? If your Will leaves your estate to more or one beneficiaries then it is important that there are two Solicitors as Trustees, to outvote the remaining family member Trustee. Otherwise he could take control. With two Solicitors this ensures that what you want to happen after your death will actually happen.
7. Can I trust the Solicitors? The Solicitors are not beneficiaries in the Trust, and they cannot benefit from the Trust in any way. Like all Solicitors they are supervised and controlled by The Law Society of England and Wales and also The Law Society of Scotland.
8. What about ongoing fees? There are NO ongoing fees. With this scheme you pay the fee to set up the Trust at the outset and have nothing further to pay unless you go into care and there is a dispute with the Council, which is very rare.
9. What kinds of assets can be placed in the Trust? Most clients place their house and any other liquid assets that they own in the Trust. Because currently any capital up to £13,000 is dis-regarded for means-testing in relation to Local Authority Financial assessments, we usually recommend that any other assets above this amount are placed in Trust, although you can have full and instant access to your assets at any time.
10. Can other assets be added at a later date? Yes, assets can be placed in the trust at a later date although, this will start the 6 month clock ticking for that particular asset.
11. Is there any limit on the value of assets placed with the Trust? The Asset Protection Trust will usually hold assets up to the value of the current Nil Rate Band (£325,000 for the tax year 2010/11) for each client, as any assets in excess of this would create an immediate charge to lifetime Inheritance Tax of 40%. There are however a number of other options to safeguard your assets if 2 Trusts do not cover your entire estate.
12. When is the best time to set up the Trust? As soon as possible. Local Authorities can retrospectively review the circumstances in which a Family Protection Trust was set up at any time. Clearly if this was set up at a time when the client was in good health, living independently and had not prospect or intention of entering long term care then there should be no problem.
13. Can I change my mind? Yes, since you control the Trust then you can close the Trust and transfer the assets back into your name at any time.
14. Can I move house? Yes, since you control the Trust you can move house in the usual way except that the deeds are signed by all the Trustees rather than by you alone; but that makes no difference.
15. What happens if one of us dies? Nothing. The Trust, and the protection that is provides, simply continues as before until the second person dies. The survivor continues to retain control of the Trust.
16. What happens if one of us becomes incapax? Nothing. The remaining Trustees simply continue as before. We also prepare Powers of Attorney as part of this process to allow this to happen. Otherwise without this arrangement, the family may have to go to Court to obtain a Guardianship Order which can be a very difficult and expensive process.
17. What happens if one of the other Trustees die? A new Trustee is simply assumed in their place.
18. Who gets my estate when I die? Whoever you have left it to in your Will. When you die it is up to the Trustees to distribute this accordingly and they will take their instructions from your Will. Having two Solicitor Trustees ensures this happens quickly and efficiently.
19. Do I need a Will then? Yes, Wills are extremely important. Any estate which is in your name when you die will be dealt with according to the terms of your Will, assuming the class of beneficiaries names remains the same. We will discuss this with you when setting up the trust.