An Ultimate Asset Protection? (UAPT)
This Trust does not need to be included in your Will and acts as a separate document set up whilst you are still alive.You, the Settlor (person setting up the Trust), decide which assets you wish to protect.
(If the asset is your property, HM Land Registry needs to be notified and the appropriate forms completed to show a change in ownership of the property).
An Asset Protection Trust is a trust used to protect assets and makes sure that they pass to your chosen beneficiaries.
Assets can be anything of value to you, ranging from houses, cash, or expensive items such as cars or boats; your beneficiaries could be your spouse, children or other family members, friends or anyone whom you would like to benefit from the trust.
The person transferring an asset into a trust is called ‘the settlor’. Once the asset has been transferred into the trust it is no longer owned by the settlor, the legal title is owned by trustees.
What can be placed in your UAPT?
You decide what is right for you; this could be property, cash or investments.
Each individual can place up to the Nil Rate Band (NRB) – currently £325,000 (as of 2015).
Trustees are appointed to manage the trust; these could be the settlor, the settlor’s spouse and children, a mixture of both, or professionals. If you own a house solely or jointly, clauses are written into the trust document giving a life interest to the Settlor and as such a right to reside for life for you and your spouse or partner. The Trustees role is to act in the best interests of the life tenant initially; you cannot be forced out of the property or lose the right to use and enjoy assets. It is also flexible enough for you to move house if you wish to downsize or just move location.
A common use for these types of trusts is to protect your home. With the rise in house prices your home is a large part of your estate and you have worked hard to own it and be financially secure. The last thing you want is to lose your home due to unforeseen circumstances or for your beneficiaries not to receive it once you have died.
An Asset Protection Trust can protect your home for you, your spouse, and future generations.
Once you have transferred your home to the trustees of the trust, the trust can offer some protection against divorce, bankruptcy, third party claims, and if you lose mental capacity, the Trustees can continue to act and look after the property and ensure your interests are protected.
On your death it may assist to reduce delays and probate costs.
The house would still be considered part of your estate for inheritance tax purposes. There is no capital gains tax to pay as long as the property remains the principal private residence of the settlors. It hasn’t been given to your beneficiaries yet so it is not at risk if for example your children got divorced or became bankrupt.
Once you have died and your beneficiaries are due to receive their inheritance your home may be protected if your children are going through a divorce or having financial problems.
Putting a property into trust may be considered to be an act of deliberate deprivation by local authorities if you are the subject of an assessment for residential care fees and the local authority may challenge the trust on this basis. Trusts are not meant to be used to avoid residential care fees, they are to protect assets and simplify probate procedures.
This is a complicated area and everyone’s situation is different so you need to discuss your circumstances and needs in person with one of our advisers so that it can be explained in more detail as the timing and circumstances of setting up a trust is very important.
BENEFITS OF AN ASSET PROTECTION TRUST
Protects your home for you, your partner, and your beneficiaries
Protects your home against sideways disinheritance if your partner remarries or co-habits after your death
Protects against third party claims
Protects against divorce or bankruptcy in you and your beneficiary’s lives
Puts your trustees in control of the property when you are elderly or if you lose mental capacity. They can look after your interests when dealing with any third parties
Protects hundreds of thousands of pounds worth of your hard earned assets
Simplifies probate procedures. Saves time and may reduce solicitors fees as there is no need for probate for the house
Can help reduce inheritance tax in your children’s estate as the property could pass directly to your grandchildren
Consider how hard you have worked to own your own home and how much money you have spent on it over the years. The last thing you want is for it to be lost before your beneficiaries receive it through unforeseen circumstances.
Setting up these trusts is a highly specialised area and all the paperwork has to be drafted by a solicitor who also deals with the land registry, but you will probably spend more money on holidays and putting petrol in your car this year!
Most people say it was the best money they spent when they look back, as it protected hundreds of thousands of pounds worth of inheritance that otherwise might have been lost, and it put them in control.