Asset Protection Trusts: Helpful Tool or Hidden Trap?

Asset protection trusts – sometimes called “family protection” or “estate preservation” trusts – are being marketed more widely than ever. They are often presented as a way to safeguard the family home from care costs or to reduce inheritance tax. The recent report from The Association of Lifetime Lawyers, Trust or Trap? The Hidden Dangers of Asset Protection Trusts, shows many people have been sold complex schemes that don’t work as hoped and sometimes make life harder later on.

Where things can go wrong

Problems usually start with how these trusts are sold. They’re often marketed as a simple, one-time fix: pay a fee now, and your assets will be protected forever. In reality, the law around care funding and inheritance tax is more complicated.

Some people find they’ve paid thousands of pounds only to face unexpected tax bills or discover that the trust doesn’t achieve what was promised. Others lose flexibility: once your home is in a trust, it’s not always easy to sell, downsize or release funds if your plans change. Unwinding a poorly drafted trust can be costly and stressful.

The report highlights real stories – for example, a couple who wanted to protect their home if they needed care later. Years on, when they tried to move, they discovered they couldn’t access the sale proceeds. Untangling the trust cost them tens of thousands of pounds.

Why regulated advice matters

The biggest risk isn’t the idea of a trust itself, but how it’s set up and who’s advising you. Many schemes are sold by unregulated companies or salespeople. They may not fully explain the downsides, and they’re not held to the same professional standards as solicitors.

A regulated solicitor or CILEX lawyer will take time to understand your aims and explain whether a trust is really the best option. They’ll also outline the tax rules, costs and what would happen if your circumstances change.

Other ways to plan

For some families, simpler planning tools such as a well-drafted will, lifetime gifts within allowances, or using existing inheritance tax reliefs, can achieve the same goals with far less risk. Even where a trust is appropriate, there are different types and structures. The right choice depends on your family, your assets and what you want to happen in the long term.

The takeaway

An asset protection trust isn’t automatically good or bad – it’s just one possible tool. But it’s not a magic shield, and it shouldn’t be sold as one. Before making any big decisions about your home or savings, it’s worth getting advice from someone who’s qualified, regulated and willing to talk through the whole picture – not just the sale.

If you’re considering a trust, or already have one and aren’t sure it’s working for you, it’s sensible to get it reviewed. The peace of mind comes not from the product itself, but from knowing it truly fits your life and goals.

For further information, or to book an appointment, contact Susan Fairless on [email protected], or Jane Flaherty on [email protected].