Recent media reports have drawn attention to the growing problem of ‘asset protection trusts’ being mis-sold to unsuspecting clients. These arrangements, sometimes called “family protection” or “property protection” trusts, are often promoted as a way to keep your home safe from care home fees or reduce inheritance tax.
However, many of these products are being sold by unregulated firms, making unrealistic promises. In some cases, clients are left worse off, facing unexpected tax issues, loss of control over their property, or expensive legal complications.
In this article, we explain what asset protection trusts can do and how to protect yourself from being misled.
What are Asset Protection Trusts?
When properly drafted and used in the right circumstances, a trust can be a valuable tool for managing and passing on wealth. For example, it can help you control how and when your assets are distributed, provide flexibility for changing family circumstances, or assist with tax planning as part of a broader estate strategy.
However, trusts are not all-encompassing. Local authorities can still treat assets placed in trust as part of your estate if they believe the move was made deliberately to avoid care fees. Likewise, if a trust is poorly structured, you could face unexpected tax charges or find it difficult to sell or access your own property.
According to the Association of Lifetime Lawyers, the mis-selling of asset protection trusts has become ‘widespread’. Many clients have been charged thousands of pounds for schemes that offer little or no genuine benefit.
Many of the firms selling these trusts are not regulated by the Solicitors Regulation Authority (SRA) or Financial Conduct Authority (FCA), and in some instances, the same company appoints itself as trustee, creating a serious conflict of interest. Clients often only discover problems years later when they try to sell their home, access equity, or deal with tax reporting obligations.
If you’re approached about setting up an “asset protection” trust, be cautious of anyone making absolute claims that your home will be safe from care costs or tax. Be wary of high-pressure sales tactics, advisers who are not SRA-regulated solicitors, or situations where you are asked to sign up quickly without clear written information about the risks, costs, and long-term implications.
If you already have a trust in place and are unsure how it was set up, it could be worth having it reviewed by a qualified solicitor to ensure it still works as intended and is compliant with current law.
How O’Donnell Solicitors Can Help
Our Private Client team can provide clear, practical advice if you are considering creating a trust or reviewing an existing arrangement. We are increasingly being called in to unpick trusts for clients who have come to realise that the trust they have been sold doesn’t serve the promised function.
Where a new trust is required, our team will explain the potential benefits and limitations, highlight alternative options, and ensure that your estate planning is both compliant and effective.
For tailored, regulated advice on estate or asset protection planning, please contact our Private Client team today, headed by Jill Waddington on 01457761320 or by email jill@odonnellsolicitors.co.uk.
