Commercial Property Solicitor Nick Hyman explains the dangers of signing up to asset protection trusts.
Nick Hyman says individuals can easily ‘lose control’ of their financial affairs and may not even recall they are tied up with a trust or fully understand its implications. They are likely to have to jump through numerous hoops and pay additional fees just to sell their own home.
Nick says: “If you are tempted to sign up for an asset protection trust my first piece of advice would be to explore thoroughly what this means for you and your family and how much it will cost you. Get advice from an independent local solicitor specialising in trusts.”
“But I would say in almost all cases, don’t get involved. There has been a huge amount of mis-selling and it’s extremely worrying.”
He adds: “Many who have signed up thought they were gaining a benefit, but they were not. Getting yourself out of this can be costly.”
Nick has dealt with three recent house sales which were complicated and delayed by the existence of such a trust, including one where a widow who had no recollection her house had been put into a trust by her late husband, until she was involved to sign. That particular client lost her sale, and therefore the purchase of the flat to which she wanted to move.
The Land Registry title will sometimes be changed to add a company or even an individual (professional trustee) or other times to include a restriction preventing any sale without the consent of such company or individual trustee. This trustee has to sign off on any sale and there will be a fee.
Nick says: “Essentially, when you place an asset into a trust, it is no longer fully controlled by you”. This can have unintentional consequences for both the owners and their families.
These arrangements are often sold by salespeople who make false promises that they will protect the family home or other assets from care home fees, preying on the vulnerability of older people who are concerned about the rising cost of care and the impact this will have on the wealth which they can pass to their families on death.
Nick explains that people (who were originally only looking for a low cost will) often feel pressured into placing their property in a trust and on many occasions the pitfalls (such as challenges by local authorities should care be needed and the Inheritance Tax repercussions of these arrangements) are not explained.
He added: “It’s fair to say that if what you are being sold sounds too good to be true, it probably is. If you have already your property in a trust I would recommend that you seek proper, professional advice from a local solicitor with appropriate experience to review and if necessary change the arrangements. If you only try to deal with this when you come to sell the property, then your sale (and any onward purchase) will be delayed at the least and possibly lost.”