Property and asset protection trusts: what you need to know before committing

A ‘property protection trust’ (PPT) also known as ‘asset protection trust’ are trust structures both for lifetime and Will trusts. It is quite unusual to have the circumstances that require one. Unfortunately, they are becoming more popular, often being sold by unregulated Will writers who are often not legally qualified. They will often call you out of the blue, persuade you to draft one, and charge thousands of pounds for placing a testator’s whole property/estate into a discretionary Will or lifetime trust.  There is rarely proper advice as to the risks and limitations of what is being done.  

The Will writers will often appoint themselves as Trustees and they may change the land registry title depending on what they have decided you should do, so during your lifetime, selling, re-mortgaging or taking equity release on your property is very difficult if not impossible because the property is held in the names of trustees, not you. They will also try to make sure that they are executors and trustees of your Will so that they can deal with the administration when you die.  They can then charge more fees often for undoing something complicated that quite possibly did not need to be done in the first place.   

They should be approached with caution.  Giving away your home to anyone including a trust and continuing to live in it, provides no inheritance tax (IHT) savings. Giving away your home to a trust ‘to avoid’ care home fees fall foul of the deprivation of assets rule. There are also tax consequences particularly for IHT, meaning that some nil rate bands are not automatically available and this could cost you a great deal of money in tax if you are not fully aware. There can also be capital gains tax (CGT) issues and sometimes, SDLT issues. The people selling are often not legally trained so are not aware or able to explain these risks.

Trusts can be useful in some circumstances, but such circumstances are complex. We will never advise you to put your whole estate into a Trust to avoid inheritance tax and care home fees. We will also not call you out of the blue and suggest you make a new Will to include such structures. 

We can advise on ways to protect your home from care home fees, and we can advise on tried and tested IHT planning considerations. Our charges are often significantly less than the fees these Will writers charge. Please contact Emma Baker in our Private Client team for further information.