Are all trusts the same?

No—and this is where confusion begins.

Trusts have been receiving a lot of attention lately, particularly as more people become aware of the costs of future care fees and inheritance tax.

These are valid concerns, but with so much misinformation circulating online, confusion has grown between two very different types of trusts. This confusion is often fueled by misleading articles about trusts being ‘mis-sold.’

Without clearly defining the type of trust, many readers are inadvertently led to believe that all trusts are equal. However, this couldn’t be further from the truth.

At April King, we have never offered these ‘mis-sold’ trusts to avoid care fees or reduce inheritance tax (IHT)—and we never will.

Trusts fall into two main categories:

1. Living Trusts (also called Lifetime Trusts, Family Trusts, or Asset Protection Trusts)

These are trusts where you transfer assets, often your entire home or cash, into the trust during your lifetime. In the case of irrevocable trusts, you lose ultimate control over the assets.

These trusts are heavily marketed online by companies using cold callers or Facebook adverts to promote a magical pill to avoid care fees, probate, or reduce/remove any inheritance tax (IHT). If it sounds too good to be true, it probably isn’t.

However, in reality, they often fail to deliver on any of these promises. In some cases, these trusts can lead to additional legal fees for the company that set up the trust and significant exit fees that may apply if you can even exit the trust.

Local authorities have the legal right to investigate. They may treat the assets in these trusts as yours under the Deprivation of Assets Rules, especially if you are seeking means-tested care funding, and there’s no fixed time limit for how far back they can investigate.

If a local authority determines that you have intentionally deprived yourself of capital or income, they may seek to recover the cost of care services already provided.

Many individuals and couples can spend around £3,000 to £7,000 on these trusts, only for them or their family to find they don’t work, until it’s too late, with little, if any, financial redress. All of this causes additional stress and costs for your family when it goes wrong.

2. Will Trusts (Trusts in Your Will)

These are legally sound, set up within your Will, and only come into effect upon the first death. April Wills provides protection without depriving you of your assets during your lifetime, keeping you in control of your most valuable asset, your home.

Unlike Living Trusts, April Wills are not affected by the Deprivation of Assets rules, as you are not giving away anything during your lifetime. Instead, you are protecting your share of the property when you pass away.

This approach allows you to safeguard your hard work within your family while also providing flexibility for a surviving spouse or partner.

Don’t get caught up in the myths. If you’re looking for a legitimate way to protect your property and estate from predatory third parties, book a free initial consultation without obligation. Call our friendly team on 0800 788 0500 or request your free information guide here.

Get in Touch

Disclaimer
The information provided in this article is for general informational purposes only and does not constitute legal, financial, or professional advice. No responsibility is accepted for any action taken or not taken based on the content of this article. Readers should seek appropriate professional advice tailored to their circumstances before making decisions. April King Legal will not be held liable for any loss or damage arising from reliance on this information.