What is an Asset Protection Trust?
The Asset Protection Trust is a specialist trust which places your assets into Trust whilst you retain enjoyment of them. Once the Trust has been created you can use it to ‘ring-fence’ your assets.
Trusts are a protective mechanism to hold your assets and so may also save you and your family many tens of thousands of pounds and ensure that your estate passes efficiently and intact to your loved ones.
Here are a few other benefits:
Protection from Probate Costs and Delays
By creating an Asset Protection Trust, your family could avoid the need for probate on your death. If all of your assets are placed into trust, potentially many thousands of pounds in legal fees can be saved, and the often lengthy process of probate can be avoided. This means that assets can be paid out to beneficiaries without delay or it can be left within the Trust for management by the nominated Trustees should you wish to ensure that the money is used for a specific purpose after your death, eg the care of grandchildren or disabled family members etc.
Protection for second marriages
In recent times many people have experienced divorce, or have sadly been bereaved at a relatively early stage in their lives. Many people are reluctant to progress new relationships simply for fear of the financial consequences if the relationship fails. This is particularly true for those who have experienced a costly divorce or are widowed and want to protect their estate for their children. By using an Asset Protection Trust prior to cohabitation you can ensure that your assets are protected and pass to your children should your relationship breakdown.
Protection for your children
As it is commonplace these days for people to remarry, many of them will not realise that by doing so, any children from a previous marriage may then not benefit from their estate. Furthermore, if your children inherit your estate and later divorce, their ex-spouse could be entitled to part of your estate, potentially disinheriting your grandchildren. The Asset Protection Trust avoids these problems, as only those who you name can benefit, and your children and grandchildren are protected in the event of a divorce.
Protection against future challenges on your estate
Not all family circumstances are straightforward; sadly many families have difficulties and issues. There may be someone that you wish to exclude from your estate, such as an estranged child, relative or dependant and without proper planning such a person can challenge your estate after death. Through the use of an Asset Protection Trust, any assets that are held within the trust are protected against such challenges. This in turn can prevent the costs and delays associated with legal proceedings.
Protection for disabled beneficiaries
If you have a disabled child or beneficiary who are unable to work and dependent on benefits, often even a modest inheritance will mean that these benefits will stop until the inheritance has been depleted. The Asset Protection Trust can help, as assets within the trust will be disregarded and may not result in any loss of benefits.
Protection from Bankruptcy
If you would like to safeguard your possessions from future unforeseen debts, the Asset Protection Trust can protect them. This does not prevent you from being declared bankrupt, however it can avoid the assets, held within your Trust, being used to re-pay outstanding debts. This can also apply to subsequent generations, preventing loss in the event that your children or grandchildren suffer financial difficulties.
Protection in the event of mental incapacity
If you are unlucky enough to lose mental capacity, the Law can declare you unfit to manage your own estate and you will no longer be allowed to manage your own affairs. If you have an Asset Protection Trust your appointed Trustees will manage the estate for you; your money will be safe whilst any other assets held outside of the Trust will fall under the control of the courts. As your Trustees are restrained by your original wishes set out when you created the Trust their management must be done within those boundaries ensuring that your original wishes are complied with.
Protection from IHT for next generation
Assets held within the Asset Protection Trust will not form part of the taxable estate of your beneficiaries. Thus assets passing to your son or daughter will not be taxed on their death, potentially saving your grandchildren tens of thousands of pounds in Inheritance Tax. Your grandchildren will be inheriting from your Trust and not from the estate of their parents.