ThinkIFA guide to ‘Asset Protection Trust’

What is an asset protection trust?

A trust which is set up to protect your assets and is basically a ‘wrapper’ which can shelter your assets from inheritance tax liability and the local authorities.

Reasons to set up an asset protection trust

There are many benefits from setting up a Family Asset trust which can also help illustrate that the trust was not set up for deliberate deprivation purposes:

  • Inheritance tax mitigation

    Because your assets are held within a trust, they do not form part of your estate when you die so are not included in any inheritance tax calculations.

  • Avoid claims on your estate

    With an asset protection trust you are able to exclude someone from your estate, such as a relative or an estranged child and they are unable to make a claim on a trust, unlike a will. This also avoids any court costs and lengthy court proceedings.

  • Sideways disinheritanceAsset protection trust from

    Disinheritance can be a big problem for some families but with an asset protection trust you can effectively ‘ring fence’ your assets and ensure that only your nominated beneficiaries will receive their inheritance. This avoids any in-law children from benefiting should any of your children marry and then diorce.

  • Avoid expensive probate fees & delays

    By having your estate protected and held within a trust, you can avoid any lengthy delays due to probate. This will also help avoid potential costly legal fees and your chosen beneficiaries can be paid out quite quickly.

  • Protect your assets from bankruptcy

    An APT can also help if you are self employed or run your own business. By holding your personal assets within a trust, you can protect them should you suffer financial difficulties or become bankrupt.

  • Financially protect yourself from divorce

    Divorce can be a very costly experience but by placing your assets into an asset protection trust prior to cohabiting with a new partner, you can protect them and ensure they are safe should the relationship fail. This is also ideal for a widow should they wish to ensure the protection of their estate for their children.

Avoid Selling your home to pay for care home fees

Should you need to go into a care home later on in your life then the local authority may demand that your house and other assets are used to help pay for the care.

This would involve the liquidation of your savings by the local authority and them taking charge of your home which could result in there being nothing left for your family when you are gone.

When you place your assets in a trust you are no longer (technically) the owner of the assets but rather the owner of the trust which means that the government / local authority would struggle to force the sale of your assets to pay for care.

“An asset protection trust must be set up whilst you are in good health and financially solvent to help avoid any potential challenge by the local authority.”

The local authority may challenge the trust and claim that you have put your assets into the protection trust as an act of deliberate deprivation if they feel you have set up the trust to purposely avoid care home fees.

However, if the trust is set up whilst you are in good health and you have no reason to expect you would need to go into a care home environment then it is extremely difficult for the government to prove this.

For more extensive information about asset protection trusts please visit our extended report page here:

Alternatively, if you would like further details regarding trusts and how they can help to protect your assets then please fill in your details below and one of our friendly partnered independent financial advisers will contact you.


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