Protecting Your Assets With Trusts
December 13, 2023

Asset Protection Trusts (APTs) can be used to protect assets for beneficiaries, avoid probate costs, protect against divorce or bankruptcy or limit unnecessary inheritance tax payments. 

By transferring assets into a trust, you will no longer own the property, but it is possible to retain rights over them.

This article considers how an Asset Protection Trust (APT) can be a great tool to protect your assets against potential threats when passing them on to your loved ones following your death.

Protecting Your Estate

An asset protection trust can set in stone who will inherit the asset upon your death.

An APT provides peace of mind since you know that your beneficiaries will be able to access what you have left for them without interference or deviation. Your Asset Protection Trust is an unwavering legal document that ensures your beneficiaries will receive precisely what you have decreed to them upon your death.

In addition, if you have vulnerable beneficiaries, the use of a trust can protect them from financial abuse or the possibility of losing their rights to beneficiaries who have mental capacity.

Eliminating the Costs of Probate

Probate is notoriously expensive and time-consuming. If your assets are in a trust, a grant of probate will not be required to administer those assets upon death, meaning these matters can be dealt with quickly and efficiently, saving your executors time and money.

Protect Against Divorce or Bankruptcy

By considering unexpected events such as divorce or bankruptcy, your children will be protected when their inheritance is in the form of a trust, protecting them from potential third parties.

Limit Unnecessary Inheritance Tax Payments

Should you give up your interest in the assets that you place in an APT and survive for over seven years after it is implemented, the assets will not form part of your estate for inheritance tax purposes, often meaning your beneficiaries incur a significant saving. During this period, it is still possible to retain control over the asset(s) by acting as a trustee, allowing you to oversee the safe management of assets.

Considerations Before Implementing an APT

Asset Protection Trusts are irrevocable, meaning transferring an asset into such trust is permanent and binding. Therefore, once an asset has been transferred, the trust effectively owns it, and another party cannot take it for any reason.

Assets that can be placed into an APT include:

  • Property
  • Capital above £14,250
  • High-value assets
  • Investments

If you intend to use an APT to reduce your capital and avoid paying fees or other creditors, there are anti-avoidance provisions that must be considered to prevent transfers from being effective.

In all cases, you must seek the advice of an experienced trusts and probate solicitor when researching and implementing an Asset Protection Trust, ensuring that you are aware of all of your options, rights and obligations.

Benefits of Asset Protection Trusts

In addition to the benefits outlined above, including the ability to protect your estate, reduce probate costs, protect against divorce and limit inheritance tax, APTs can also:

  • Reduce care home fees (provided that the goal of the trust is not deprivation of assets).
  • Minimise claims against your estate.
  • Minimise complications associated with benefits.

Cons of Asset Protection Trusts

Although APTs are a great tool in ensuring your loved ones are protected, people are often concerned about the lack of control that such trusts mean they have. When you place an asset into a trust, it is no longer controlled by you. Despite retaining ownership until death, many people find this prospect uncomfortable.

In addition, failure to adequately plan and organise a trust can lead to issues, which encompasses the major ‘disadvantages’ of utilising an APT.

Additionally, a poorly executed or researched trust could lead to you falling foul of taxes such as Capital Gains, Land, Income, Stamp, and most commonly, Inheritance Tax.

Trusts Solicitors Cambridgeshire

At Bowsers Solicitors, our experienced private client lawyers have supported clients with all aspects of trusts, including assisting with organising, administering, crediting and terminating trusts. 

Our trust solicitors will take the time to explain the options available to you and advise accordingly, ensuring that your intentions are met, and your loved ones are protected.

For more information or to book an appointment with us, please call 01945 583194 (Wisbech) or 01354 652606 (March). Alternatively, please fill out this contact form or email reception@bowsers.co.uk