What are asset protection trusts and why do the elderly need to be careful of these schemes?

Asset protection trusts, sometimes called property protection trusts or estate preservation trusts, are often promoted as a means for homeowners to protect their property against local authority charges if they have to go into residential care.

The theory is that a property placed in trust is not regarded as the settlor's asset for means-testing purposes.

However, many of the organisations who sell these schemes pray on the vulnerable population, focusing on the benefits of these Trusts, rather than taking a more balanced approach.

As member of Solicitors for Older People Scotland, a group of Scottish Law firms dedicated to providing legal services to older people in a caring and sensitive way and working in partnership with Age Scotland, McQueen Legal are well aware that some schemes to do not deliver what they promise. It is important to know that:

  • local authorities are entitled to disregard the Trust when assessing the individual's assets
  • if the property is gifted into a Trust then there will be a chargeable transfer for Inheritance Tax purposes
  • if the property interest is sold to the Trust then although deprivation of assets may be avoided then another tax raises its head, SDLT
  • when sold in isolation, these Trusts often do not meet the family‚Äôs overall needs

McQueen Legal Partner Dot Mullally advises people to be extremely cautious of an Asset Protection Trust or similar scheme offering to help them avoid care home costs, as this might result in even greater financial uncertainty in the future.

Whether it is to sell a property, organise a power of attorney or making a Will or Advance Directive, if you would like to speak to a solicitor who is experienced in this area, then please contact Dot Mullally.

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