Asset Protection Trust
WHAT IT IS AND WHEN IT IS APPROPRIATE TO HAVE ONE
An Asset Protection Trust (APT) is a trust used to protect assets and to try and make sure they pass to your chosen beneficiaries. Assets could be property or cash, or both, your beneficiaries could be your spouse or partner, children or other family members, friends or anyone whom you would like to benefit from the trust.
The person transferring an asset into a trust is called ‘the settlor’. Once the asset has been transferred into trust it is no longer owned by the settlor, the legal title is owned by trustees.
Trustees are appointed to manage the trust assets; these could be your children, the settlor, the settlor’s partner, a mixture of both, or professionals. If you own property solely or jointly clauses are written into the trust document giving a life interest to the Settlor and as such a right to reside for life for you and your spouse or partner. The trustees’ role is to act in the best interests of the life tenant initially; you cannot be forced out of the property or lose the right to use and enjoy assets. It is also flexible enough for you to move house if you wish to downsize or just move location.
A common use for these types of trusts is to protect your property. With the rise in property prices, your property is a large part of your estate and you have worked hard to own it. The last thing you want is to lose your property due to unforeseen circumstances or for your beneficiaries not to receive it once you have died. An APT can protect your property for you, your partner, and future generations.
Once you have transferred the property to the trustees of the trust, the trust can offer some protection against divorce, bankruptcy, and third party claims. If you lose mental capacity the trustees can continue to act looking after the property and ensuring your interests are protected. Once you have died and your beneficiaries are due to receive their inheritance the property may be protected if your children are going through a divorce or having financial problems. Upon your death, it may help to reduce delays and probate costs.
Transferring property into a trust may be considered to be an act of deliberate deprivation by local authorities if you are the subject of an assessment for residential care fees, and the local authority may challenge the trust on this basis. Trusts are not meant to be used to avoid residential care fees, they are to protect assets and simplify probate procedures. This is a complicated area so you need to discuss your circumstances and needs in person with an adviser so that it can be explained in more detail as the timing and circumstances of setting up a trust are very important. They are not appropriate for everyone and the trustees need to fully understand their roles.
AN ASSET PROTECTION TRUST MAY PROVIDE SOME PROTECTION IN THE FOLLOWING SCENARIOS
Protection for you, your partner, and your beneficiaries
Protection against sideways disinheritance if your partner remarries or co-habits after your death
Protection against third party claims
Protection against divorce or bankruptcy in you and your beneficiary’s lives
Puts your trustees in control of the property when you are elderly or if you lose mental capacity. They can look after your interests when dealing with any third parties
Simplifies probate procedures. Saves time and may reduce solicitors fees as there is no need for probate for the property
Can help reduce inheritance tax in your children’s estate as the property could pass directly to your grandchildren
Complete the contact form on the ‘contact us’ page or phone Martin Wood on 07809 686904 to book a free consultation in your home.