If you live in England and have assets over £23,250 – you may not qualify for assistance with care fees. (£50,000 in Wales)

The UK government estimates that around 30,000 to 40,000 people in England are “forced” to sell their homes each year to cover care costs.

There is no way to legally dispose of assets specifically to avoid care home fees! This would be classed as a deliberate deprivation of assets and would fail!

If the Local Authority can determine you have deliberately tried to reduce your assets to avoid care costs, they will challenge and likely outcome is they will win.

However, while the primary purpose of setting up an Asset Protection Trust (APT) cannot be to avoid care fees, there can be incidental benefits if the trust is established under the right circumstances. This means setting up the trust when long-term care is not foreseeable, for legitimate reasons, and with appropriate beneficiaries. When done correctly, an APT can provide peace of mind and financial protection.

By taking a proactive and lawful approach to asset protection, our clients have been able to secure their financial legacy for their intended beneficiaries without falling afoul of regulations designed to prevent deliberate asset deprivation.

Families can be complex, and there are times when parents decide to exclude a child from their Will. Legally, an excluded child has the right to challenge the Will and file a claim against the estate. These challenges are often successful, which can lead to unintended distributions of assets and potential family disputes.

In contrast, contesting a Trust is significantly more challenging. Trusts are structured with specific legal protections that make it much harder for disinherited family members to successfully claim any part of the assets held within the Trust. This higher level of difficulty in contesting a Trust means that it is much less likely for assets to be diverted to someone you did not intend to benefit.

Furthermore, a Trust can offer a more controlled and private way to manage and distribute your assets. Unlike Wills, which become public record through the probate process, Trusts typically remain private, thereby reducing the likelihood of disputes and challenges. This privacy can be particularly valuable in preserving family harmony and protecting the confidentiality of your estate plans.

Setting up a Trust can provide you with peace of mind, knowing that your assets will be distributed according to your wishes. It ensures that your designated beneficiaries receive their inheritance without the risk of legal battles that can arise from contested Wills. Additionally, Trusts can offer more flexibility in how and when the assets are distributed, providing ongoing financial management and support for your beneficiaries as per your specific instructions.

In summary, while disinherited children can often successfully contest a Will, the robust legal structure of a Trust makes it much more difficult for unintended beneficiaries to claim your assets. By establishing a Trust, you can protect your estate, uphold your wishes, and provide a clear, dispute-resistant plan for the distribution of your assets.

Even if you currently do not face an Inheritance Tax (IHT) issue, failing to establish a Trust can inadvertently create one for your children. When assets are left directly to your children through a Will, these assets become part of their estate. Consequently, they may attract IHT when your children pass away, potentially reducing the inheritance they can pass on to their own heirs.

By placing assets into a Trust, you can effectively shield them from becoming part of your children’s estate. Assets held in a Trust are managed according to the terms you set, and they do not legally belong to your children. This means that these assets are not subject to IHT upon your children’s deaths, thereby preserving more of your wealth for future generations.

Moreover, Trusts offer a range of additional benefits beyond just mitigating IHT. They provide a controlled and flexible method for managing and distributing your assets according to your specific wishes. For instance, you can stipulate conditions under which your beneficiaries receive their inheritance, such as reaching a certain age or achieving specific milestones like completing higher education. This level of control can be particularly beneficial if you are concerned about the financial acumen or responsibility of your heirs.

Furthermore, Trusts can protect your assets from various risks, such as divorce, bankruptcy, or other legal claims against your beneficiaries. This protection ensures that your wealth is safeguarded and used as you intended, even in the face of unforeseen circumstances that may affect your heirs.

In addition to these practical benefits, establishing a Trust can provide significant emotional peace of mind. Knowing that your assets are protected from IHT and that your estate plan is both robust and flexible can relieve stress and uncertainty. It also offers assurance that your loved ones will be provided for according to your wishes, without the risk of significant tax liabilities diminishing their inheritance.

In conclusion, while you may not currently have an IHT issue, neglecting to set up a Trust can inadvertently create one for your children. By placing your assets in a Trust, you ensure that they do not become part of your children’s estate, thereby avoiding potential IHT and preserving your wealth for future generations. Trusts offer a comprehensive solution, providing control, protection, and peace of mind, making them an essential tool in effective estate planning.