top of page
AdobeStock_207935793.jpeg

Family Protection Trusts

The only way to completely protect your assets and loved ones.

With a Family Protection Trust you can put in place an extra system of protection for your assets to ensure that what you want to happen to them does happen. Your Will remains in force as per your wishes and you can update or change it at any time.

 

Your Family Protection Trust works alongside your Will and provides complete protection for assets placed within it, which may mean that you can leave behind more for your loved ones than what might be left with a Will alone. 

Family Protection Trusts

Your Will is the first, key step towards planning successfully for the future of your estate as it tells everyone how you want your money, your property and all your belongings to be shared when you pass away. A Will alone however does not offer protection to the assets it describes; Wills can be challenged, circumstances can change, there can be new births and re-marriages that might alter who has a right to claim on your estate when you pass away. With a Family Protection Trust you can put in place an extra system of protection for your assets to ensure that what you want to happen to them does happen.

 

Your Will remains in force as per your wishes and you can update or change it at any time. Your Family Protection Trust works alongside your Will and provides complete protection for assets placed within it, which may mean that you can leave behind more for your loved ones than what might be left with a Will alone.

What is a Family Protection Trust?

In technical terms, a Family Protection Trust is a lifetime discretionary trust. The client who sets up the trust is called the settler - this client is usually one of the trustees and it is normal to appoint two professional trustees to act along with the client. You keep your Capital Gains Tax Exemption so there is no tax to pay when your house is sold, and your family should have no executory procedure or costs to pay when you die. 

So how does it work?

You set up your trust and place your house and any other assets into it - you should regard your trust as a safety deposit box to which you hold the only key; You can access your capital at any time, you have the right to any income from investments held in your trust and you can occupy your house, while knowing that there will be no administration on the assets in your trust to worry about for those dealing with your estate when you pass away. If you change your mind and wish to remove assets from your trust at a later date you are fully able to

Be in control at all times

With a Family Protection Trust you stay in control. You simply place your assets in trust and act as the main trustee; This means that you can carry on using your assets - your home, your money and your investments - just as you normally would, while still placing them into a system of protection. You are free to sell your property, spend your money as you want and to save and invest as usual. Most importantly any property, savings and investments held in the trust can continue to grow in value. 

The Problems We Face As We Get Older

1. Executry costs

When you die your family will probably need a solicitor to wind up your estate. A common complaint is that it takes too long and costs too much. Your estate planning consultant can give you an accurate cost based on your assets.

2. Sideways Disinheritance

When the first partner in a marriage passes away, the surviving spouse receives the inheritance. If the surviving partner then remarries and passes away before their new spouse, the new spouse may inherit the estate and bypass children and beneficiaries from the first marriage.

3. Children's Legal Rights

Children can claim a share of your moveable estate when the first parent dies and a larger share when the second parent dies. It does not matter whether you have made a Will or not or whether you have chosen to leave anything to your children in your Will - your children have a Legal Right under Inheritance Law in Scotland to claim their share of the estate. There is no age limit for making such a claim and claimants have twenty years to decide. It has recently been proposed that children should also be entitled to a share of your home, not just your moveable estate. Sometimes this is not what you want and is not in your children's best interest.

4. Children Inheriting At The Wrong Time

Unfortunately it is not uncommon for children to have problems - e.g. a shaky marriage, circumstances requiring them to receive state benefits, alcohol or drug problems, gambling problems or financial problems. When experiencing circumstances such as these a child may be vulnerable and easily financially exploited, and it may be unwise to leave a large share of your estate to a child without any financial controls in place. If you are aware of any such problems please make us aware when discussing your will so that we may take them into consideration, however more often than not these problems remain unknown to parents or only develop later in life after a will has been made. The result may be that while you thought you were doing your best to help your children, a sudden influx of inheritance without financial controls in place may be causing more harm than good.

 

5. Children's Inheritance Tax

Surprisingly often when a parent's estate is added to the children's estate the children are faced with an IHT liability, especially in cases where children are inheriting from both sides of the family. Nobody wants to cause a financial IHT problem for their children but this can happen without proper planning.

 

6. Incapacity

As we get older we sometimes find that we are no longer able to handle our affairs in the way that we once did. If we reach this stage and no power of attorney is in place the only option for our family or loved ones is to apply to the court for an order which is extremely expensive, can take a long time and doesn't always achieve the results which we are seeking.

 

7. Care Costs

At time of writing 1 in 3 women over 65 and 1 in 4 men are likely to be placed into care - even worse, in the next generation aged between 45 and 65 it is estimated that 1 in 2 will go into care. If you go into care your local authority may seek to take your money and assets to cover your care costs, and this may include your home. 

Our Solution

1. Executry costs

Having your assets in a Family Protection Trust means there should be no executry procedure and therefore no expensive executry costs. Also the process of having your estate administered is much quicker allowing the family to avoid the time consuming and often very mentally draining process of confirmation/probate.

2. Sideways Disinheritance

If the bulk of assets remain in the Family Protection Trust you don't have to fear that through a remarriage your estate could bypass your children to a new spouse. While assets are held in a Trust a surviving partner still has the benefit of those assets, however if they remarry the assets remain in the trust and will not pass to the new spouse - this ensures that any assets placed in trust are protected from being inherited by someone who they are not intended for.

3. Children's Legal Rights

If the inheritance of certain assets by your children is a concern, then a Family Protection Trust can help. If you pass away while assets are held in a Trust, those assets can only be distributed by your trustees in the way which you instructed. Children do not legally have a right to assets held in a Trust unless you wish them to do so.

4. Children Inheriting At The Wrong Time

When inheriting large assets or large sums of money timing is incredibly important. If you place the bulk of your assets in a Family Protection Trust you can instruct your trustees as to when and how to distribute your estate and to hold the distribution of your estate back if you prefer. .

 

5. Children's Inheritance Tax

Each parent may protect assets up to the value of £325,000 in a Family Protection Trust. When the parents pass away the assets held can be:

 

  1. Paid out

  2. Remain in the Trust for the benefit of the children

  3. Lent to the children in exchange for an IOU. 

6. Incapacity

A Power of Attorney is something that we highly recommend to everyone as we are all unaware of what the future may hold or when we may need a loved one to act on our behalf. However, if you have failed to put in place a Power of Attorney but have set up a Family Protection Trust and transferred the bulk of your assets into the Trust, then the trustees will be able to manage those assets in a similar manner to the power of a registered attorney. 

 

7. Care Costs

With the frequency of elderly persons being placed into care and the cost of care itself rising, care costs are one of the most common queries we get regarding future estate planning. The three most common options for dealing with care costs are: 

  1. Do nothing and hope for the best. This saves you paying anything now, but it could cost you dearly in future and jeopardise your entire estate.

  2. Transfer assets to your family. In doing so you will lose complete control of your assets and things can potentially go wrong; If a family member falls out with you or gets divorced, is made bankrupt or dies before you, there may be serious consequences for you and your transferred assets.

  3. Set up a Family Protection Plan - You cannot set up a Trust to remove your assets from care cost calculations, however all the options above are vitally important reasons to set up a Trust, and if you need to go into care later on your children or spouse will be protected from losing the assets you have put aside in a Trust for them to care costs. 

bottom of page