A Guide to Asset Protection Trusts

25 Apr 2024 | Jenny Walsh

Table of Contents

One good reason to place your assets into a trust is to protect family wealth without fearing for its future. Trusts for asset protection can protect your assets from creditors and other claims and are an effective way to ensure that wealth stays in the hands of those you intend.

What is an asset protection trust?

An asset protection trust is a type of trust that is set up during your lifetime, but the assets in the trust are distributed to the beneficiaries after you die. Property, investments and other assets that are placed into the trust stop being part of your legal ownership, and that keeps them safe and out of reach from creditors and other claimants.

What is a family asset protection trust?

This is a type of asset protection trust used to hold family assets that are to be preserved for future generations, helping to manage, control, and protect the family wealth.

How do asset protection trusts work?

Like all trusts, asset protection trusts work by ring fencing assets and placing them in the trust container for the benefit of the trust’s beneficiaries. Unlike some other trusts, you can continue to use the assets prior to death, including living in the family home. When you die, the trust assets are passed to the beneficiaries according to the trust’s conditions.

Why should I set up an asset protection trust?

The main reason to set up an asset protection trust is to ensure that the family’s financial security is not eroded by unexpected changes in circumstances. You probably don’t expect to go bankrupt but, if you did, then your assets could be used to pay debts. In complex family structures, there’s also the risk of sideways disinheritance. This is where you pass away leaving everything to your partner and your partner remarries, leaving the family wealth to their new family and the children from your first marriage with nothing.

Asset protection funds are also widely touted as a way of protecting the family home from a local authority assessment for care fees. While they can be a helpful tool in residential care fee planning, keeping money away from a local authority means assessment cannot be the sole basis of setting up the trust.

What are the pros and cons of asset protection trusts?

Pros:

  • Comprehensive legal protection for the trust assets, protecting them from claims
  • Probate is not necessary so the transfer of assets can be dealt with more quickly
  • The trust can be structured to minimise inheritance tax liabilities
  • You can do what you want with the assets during your lifetime
  • Flexibility regarding how assets are managed and distributed

Cons:

  • Complex arrangements that require a high level of skill to establish
  • Reduces your access to funds and assets in a financial emergency
  • They’re not foolproof. The courts and local authorities can reverse any gifts into trusts where the trust is effectively a sham and to defraud creditors or avoid care home fees.

What is the best type of trust for asset protection?

This will depend entirely on your individual situation and what you are hoping to achieve. It is important to work with an experienced trusts lawyer who can take a holistic view of your needs and ensure all legal requirements are met. These trusts involve a lot of thought and careful planning. Our experienced team can help advise you on the best solutions to suit your family and financial circumstances.

How much does an asset protection trust cost?

The cost will depend on the complexity, type and value of the assets you wish to transfer into the trust. For example, conveyancing fees will be payable when transferring property into the trust in addition to the costs of setting up the trust. We offer competitive rates and can explain the cost of setting up an asset trust in more detail – get in touch with us to find out more.

How we can help?

Speak to a specialist trusts lawyer about an asset protection trust. Contact us to get started. Call 020 7485 8811 or fill in the contact form below.

Share this article

Contact

Contact us today

For a free initial conversation call 020 7485 8811

Email us Send us an email and we’ll get back to you






    • Mark Freedman is a serious player. A fearless family law litigator, who protects his clients’ interests passionately.

      Legal 500 2020 - Mark Freedman

    • "Commitment to the cause, willingness to go the extra mile and complete command of the area mean they always give the right advice and do the best job possible."

      Legal 500 2023

    • "I find Osbornes’ client-friendly approach welcoming and refreshing"

      Legal 500 2021

    • Laura is a seriously good junior lawyer who has experience and judgement beyond her years

      Chambers UK 2024

    • 'The team deals with multi-million pound, often multifaceted claims, involving such factors as severe brain, psychiatric, gynaecological and spinal injury, major trauma, amputation and fatality.'

      Legal 500 2023

    Related InsightsVIEW ALL

    1. english countryside
      25.4.2024

      A Guide to Will Trusts

      What is a trust in a will ? Setting up a trust in your will can protect assets for your loved...

      Read more
    2. osbornes hampstead office
      25.4.2024

      What is a Mirror Will?

      Mirror wills are mirror images of each other and practically the same in every way. They suit couples, married or...

      Read more
    3. english countryside
      23.4.2024

      A Guide to Life Interest Trusts

      In today’s complex families, protecting assets for your children while ensuring that a surviving spouse can still enjoy them...

      Read more
    4. desk with flowers
      23.4.2024

      What is a discretionary trust?

      With a discretionary trust, there is no automatic right for beneficiaries to receive funds from the trust. Instead, the trustees...

      Read more
    5. night sky
      22.4.2024

      5 Things You Should Never Put in a Will

      When it comes to writing a will, you want to make sure that your wishes are known and that the...

      Read more
    6. Forged will pic
      22.3.2024

      Forged Wills

      If the contents of a will comes as a surprise, then one of the things to consider is whether the...

      Read more
    7. 14.2.2024

      What is Proprietary Estoppel?

      What is Estoppel? In general terms, estoppels operate where one party has acted on the basis of a statement made...

      Read more
    8. 14.2.2024

      Duties of Trustees

      What is a trustee? When someone sets up a trust, they will appoint trustees to manage the trust and its...

      Read more
    9. Deed of variation to a will
      3.11.2023

      Deed of Variation: Making a Change to an...

      What is a deed of variation? A deed of variation is a legal document which can be used to alter...

      Read more
    10. Constructive Trusts
      31.10.2023

      Constructive Trusts

      Property rights are not always clear-cut. Sometimes, a person who does not legally own a property could be entitled to...

      Read more
    11. osbornes law writing pad
      17.9.2023

      What is a Codicil?

      What is a codicil to a will? Life has a habit of changing and your will may need to change...

      Read more
    12. man looking at a lake
      31.8.2023

      Can Someone With Dementia Make A Will or...

      It’s a sad reality in an ageing population that more people than ever suffer from dementia in the UK....

      Read more
    13. waiting
      31.8.2023

      Can a Lasting Power of Attorney Be Challenged?

      The number of people recognising the importance of making a Lasting Power of Attorney (LPA) has risen dramatically in recent...

      Read more
    14. 10 tips
      26.7.2023

      Wills Disputes: The Duty To Account Is Not...

      Beneficiaries frequently ask us whether trustees or personal representatives can be required to provide a financial account. Their request may...

      Read more
    15. international map and money
      9.6.2023

      Will Dispute Case Law

      New Births And New Relationships? Review Your Will To Avoid A Dispute You’d imagine a wealthy businessman with assets...

      Read more
    16. older couple
      9.6.2023

      Of Bad Character: Undue Influence Claim Succeeds

      Naidoo v Barton: undue influence and the risks of mutual wills Can someone’s bad character be used to prove...

      Read more
    17. lady holding a cup
      22.5.2023

      Case Law: Dementia-Induced Mild Cognitive Impairment

      Dementia is a harsh reality for increasing numbers of families. Sadly, it means the disputed wills solicitors at Osbornes Law...

      Read more
    18. eu flags
      26.4.2023

      German Court Rules on EU Succession Regulation

      Succession laws vary from country to country which historically made the administration of cross-border estates potentially complex. Since 17 August 2015, the...

      Read more
    19. couple holding hands
      16.3.2023

      Are trusts protected from divorce?

      Can trusts protect an inheritance from your spouse? A trust is a separate legal entity. Neither spouse owns its assets....

      Read more
    20. the moon
      1.3.2023

      How to prevent someone contesting a will

      It is fairly rare in my experience for a parent to write a child out of their will but that...

      Read more
    21. primrose hill london
      8.2.2023

      Gifting Property to Children

      Can I gift property to my children? Gifting a property to your adult children is a relatively complex transaction but...

      Read more
    22. house in regents park london
      15.11.2022

      Contentious Probate Case Studies

      Contentious probate involving business assets Our contentious probate solicitors act for the defendants to a claim issued to pronounce in...

      Read more
    23. last will and testament disputes
      27.10.2022

      Contesting A Will Case Studies

      Will dispute on grounds of lack of capacity Our contesting a will solicitors acted for the claimants, the adult daughters...

      Read more
    24. Closeup of a hand signing
      2.8.2022

      Do you need to register your trust?

      The Trust Register was introduced in 2017 as part of anti-money laundering regulations. Previously, only trusts with a UK tax liability...

      Read more

    VIEW ALL