Asset Protection Trust Risks: What You Need to Know
In recent years, a growing number of people across the UK have been sold something called an asset protection trust. These are sometimes called ‘family protection trusts’ or ‘flexible trusts’. They are often marketed to people who own their home, especially those who are close to or already in retirement.
The adverts and sales talks can sound reassuring. They claim the trust can protect your home from future care fees, help your family avoid probate, and even cut your inheritance tax bill. Many people understandably think this is a simple way to protect what they have worked hard for.
But the truth is far more complicated. And for thousands of families, these trusts have caused financial stress, legal problems, and in some cases a loss of control over their own home.
Why These Trusts Are Being Mis-Sold
The main issue is that many of these trusts are sold by unregulated companies or individuals. They are not overseen by the Financial Conduct Authority (FCA) or any legal regulator. If something goes wrong, you may have no one to complain to and no protection.
The promises made during the sales pitch are often misleading. Many people are told that putting their home into a trust will definitely protect it from being used to pay for care. This is not true. In certain situations, local councils can treat the transfer as deliberate deprivation of assets, meaning they can ignore the trust and still take the property into account.
Some people are also told the trust will cut their inheritance tax bill. In many cases, it does not. In fact, some trusts increase tax costs or create unexpected charges.
The setup fees themselves are usually between £3,000 and £5,000. But the real costs often appear later. These may include expensive legal bills to undo the trust, problems selling the property, family conflict or delays at the very time loved ones most need things to run smoothly.
Many people only realise something is wrong years later, often when important life changes arise, such as downsizing, moving into care or dealing with a bereavement.
Who Is Being Targeted?
These trusts are often sold at seminars in workplaces, community centres or retirement clubs. Some companies even partner with charities or other respected organisations to look more trustworthy. The marketing usually plays on fear of losing your home to care fees and pushes people to sign up quickly.
How to Spot a Problem Trust
Here are some clear warning signs that a trust may not be right or may even be unsafe.
Red flags:
- The person selling the trust is not a regulated professional.
- You are told the trust will definitely protect your home from care fees or remove all inheritance tax.
- You feel pressured to sign quickly.
- The provider wants to make themselves a trustee of the trust.
- You receive standard paperwork instead of personalised advice.
- You are not fully told about the about risks or alternatives.
If you see any of these, it is time to slow things down or walk away.
What Good Advice Looks Like
Safe, trustworthy guidance looks very different. These are the green flags that show you are likely dealing with a reputable professional.
- The advice comes from a fully regulated professional such as a solicitor.
- You get clear written explanations of the risks and limitations.
- Fees are transparent.
- You are encouraged to ask questions and take your time.
- The trust is tailored to your personal situation rather than sold as a one size fits all product.
- You choose your own trustees and stay in control.
Trusts can be helpful in the right circumstances. They are useful tools for certain families, especially those with complex needs or vulnerable beneficiaries. But they are legal structures, not simple products, and must be handled with care.
What You Should Do Before Making Any Decisions
If you are considering an asset protection trust or if a friend or family member has been approached, there are some simple steps that can protect you.
- Speak to a regulated professional such as a solicitor who specialises in estate planning.
- Ask for a clear explanation in plain English of what the trust can and cannot do.
- Make sure you understand the long-term effects on tax, care fees and control of your home.
- Get a second opinion if you feel pressured or unsure.
- Do not sign anything at a seminar or sales meeting without time to reflect.
A trustworthy adviser will help you decide whether a trust is even needed. In many cases, there are safer, simpler and more cost-effective ways to achieve your goals.
Final Thoughts
The rise of mis-sold asset protection trusts is becoming a major consumer issue across the UK. Many families only discover the problems when it is too late. By staying informed, asking the right questions and working with properly regulated professionals, you can protect both your wealth and your peace of mind.