What is a Family Protection Trust
Family Protection Trusts are often recommended to individuals and families who want to protect their assets from potential future creditors. They are designed to protect the family home from certain creditors, such as care home costs and inheritance tax liability. However, many clients are unaware of the implications of setting up a Family Protection Trust. They may not have been properly advised of the potential pitfalls of doing so.
A Family Protection Trust is simply a trust that holds assets owned by an individual or a family. However, once assets such as the family home are transferred into a trust, the trust owns the property and the family no longer owns the property.
Problems with Family Protection Trusts
One of the most common issues with Family Protection Trusts, is the deprivation of assets. If a council believes that a trust has been set up to avoid care home costs, it can challenge the trust in court. If the council is successful, the trust is ineffective and the costs of setting up and running the trust plus the court costs are all wasted.
Another common problem is that some professional trustees are insisting on being paid to resign their position. This may not be an intractable problem and can be subject to negotiation.
Additionally, where a property is subject to a mortgage, the lender is very unlikely to agree to allow the property to be transferred into a trust whilst there is still an outstanding mortgage. This could result in the mortgage company seeking to recover the full amount of the outstanding loan from you if they become aware of the transfer.
What’s more, almost all trusts should have been registered with HMRC by late 2022. A failure to register a trust with HMRC potentially exposes the trustees to a penalty for late registration. Trusts must also pay tax every ten years and may be liable for tax if assets are sold.
How We Can Help
At Oracle Law, we can help you with the following: mis-sold trusts, explaining your trust to you and what can be done about the trust, removing trustees, registering the trust with HMRC, and assessing whether any tax is due. Although we do not give tax advice as part of our services, we work with chartered accountants who can provide this service.
In conclusion, Family Protection Trusts have been mis-sold as a way to protect your assets, however, they can be complex and not actually provide the protection you require. We act on behalf of many individuals and families who have been previously advised to put their family home and other assets into a trust.
Contact us today to learn more.