Asset Protection Trusts: Legal Insights from Altrincham’s Estate Planning Experts

As a specialist wills and estate planning law firm based in Altrincham, we are often approached by clients who have run into problems after being advised to place their property into an “asset protection trust” — also known as a “family asset protection trust.”

These trusts are often marketed as a way to avoid care fees, reduce inheritance tax, and bypass probate costs, but they carry risks that are rarely explained upfront.

Common Risks of Asset Protection Trusts

1. Loss of Control Over Your Property

Once your property is placed into a trust, legal ownership transfers to the Trustees.

Even if you’re one of the Trustees, decisions like selling the property require unanimous Trustee approval. Disagreements — especially among family members — can lead to legal disputes and delays.

2. Unexpected Tax Liabilities

Asset protection trusts may trigger:

• Entry charges

• Ten-year anniversary charges

• Exit charges

If you retain the right to live in the property, it may still be subject to inheritance tax. You could also lose the Residence Nil Rate Band (RNRB), and face higher Capital Gains Tax and Stamp Duty when selling or buying property through the trust, for example if you wanted to downsize in the future.

3. Care Fee Assessments May Ignore the Trust

Local authorities often investigate the intent behind trusts. If it appears the trust was created to avoid care fees, the trust may be disregarded, and the assets included in care fee calculations. There is no seven year rule for this; the seven year rule has nothing to do with care claims so Local Authorities are not prevented from including the property if it was transferred more than 7 years ago.

4. High Setup Costs

Trusts are very complex, and often expensive to set up. Many companies selling them are not regulated by the Solicitors Regulation Authority and, although they are based on solicitor-drafted templates, they are sold by unregulated salespeople with no legal qualifications. There are often additional extra charges added to the initial fee quote.

5. Poorly Drafted Wills

Companies selling these trusts often bundle in will-writing services. These are not always regulated by the Solicitors Regulation Authority, and the resulting wills may be legally flawed or incomplete.

Why Choose a Regulated Solicitor?

Unlike sales-driven companies, we offer impartial, expert advice tailored to your personal circumstances. We don’t benefit financially from whether or not you proceed with a trust — our goal is to help you to make informed decisions.

What Should You Do Next?

If you're considering placing assets into a trust for tax or estate planning purposes, speak to our Private Client team. We specialise in:

• Asset protection and trust advice

• Inheritance tax planning

• Will drafting and probate

• Long-term care fee strategies

Based in Altrincham, we serve clients across Greater Manchester and Cheshire.

To check if you're dealing with a regulated law firm or a qualified Solicitor, you can use the Law Society’s Find a Solicitor tool.