Family asset protection trust

Dandylion

This type of trust seems to get a lot of criticism, yet there are plenty of companies around selling them. Are they really so bad?

I ask because a relative has paperwork showing their house is owned this way although the Land Registry title just shows the usual tenants in common wording for him and wife. Is there anything stopping them from shredding the trust paperwork? It's from around 20 years ago, they'd forgotten they'd done it and the company that sold it hasn't been in touch since, nor have the trustees (other relatives who've also probably forgotten about it). The house is worth about £200k if that helps.

Keep_pedalling

Yes, they are almost always a terrible idea, but while anyone can sell such trust for fat fees without any qualification or regulation, there will always be sharks to sell them.

In this case where it seems the property was never formally transferred to the trust, it does not exist so the best thing they can do is to shred it and forget it. 

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg33020#:~:text=There%20must%20be%20some%20property,the%20trust%20does%20not%20exist.

Do they have wills in place? 

Dandylion

Thanks for that.

Yes there are wills, written by the same company I think, they mention the trust - and say this:
“Absolute Residuary Gift

SUBJECT to the trusts DECLARED above my Executors SHALL HOLD my estate for the trustees of THE xxxx xxxxxx FAMILY TRUST

absolutely”

So if they shred the trust paperwork they would be wise to make new wills?

Marcon

Dandylion said:

This type of trust seems to get a lot of criticism, yet there are plenty of companies around selling them. 

There are plenty of companies selling cigarettes, but that doesn't mean they are good for your health.

RAS

Dandylion said:

Thanks for that.

Yes there are wills, written by the same company I think, they mention the trust - and say this:
“Absolute Residuary Gift

SUBJECT to the trusts DECLARED above my Executors SHALL HOLD my estate for the trustees of THE xxxx xxxxxx FAMILY TRUST

absolutely”

So if they shred the trust paperwork they would be wise to make new wills?

Absolutely need new will. Strongly suggest they use a STEP trained lawyer. And the only trust they should discuss is an Immediate Post Death Interest trust. That means that the portion of the property owned by the first deceased is held in trust for the beneficiaries, protected from remarriage, CGT, benefits and family breakdown whilst allowing the survivor to live free in the property etc.

Keep_pedalling

Dandylion said:

Thanks for that.

Yes there are wills, written by the same company I think, they mention the trust - and say this:
“Absolute Residuary Gift

SUBJECT to the trusts DECLARED above my Executors SHALL HOLD my estate for the trustees of THE xxxx xxxxxx FAMILY TRUST

absolutely”

So if they shred the trust paperwork they would be wise to make new wills?

Yes they need new wills. Do they hold the original wills? If they do they should shed those at the earliest opportunity, it is better to die intestate than with those things in existence. The trust might not exist now but that those wills could make it a reality if one of your parents died. Even without the trust 20 year old wills probably need renewing if for nothing else than changing the executors. 

They should make new wills with a local solicitor not a will writing company who are often in the habit of up selling  by adding ‘services’ such as useless trusts. The only type of trust that might be worth considering is an immediate post death interest trust which protects the estate of the first to die on the remarriage of the surviving spouse. 

poseidon1

RAS said:

Dandylion said:

Thanks for that.

Yes there are wills, written by the same company I think, they mention the trust - and say this:
“Absolute Residuary Gift

SUBJECT to the trusts DECLARED above my Executors SHALL HOLD my estate for the trustees of THE xxxx xxxxxx FAMILY TRUST

absolutely”

So if they shred the trust paperwork they would be wise to make new wills?

Absolutely need new will. Strongly suggest they use a STEP trained lawyer. And the only trust they should discuss is an Immediate Post Death Interest trust. That means that the portion of the property owned by the first deceased is held in trust for the beneficiaries, protected from remarriage, CGT, benefits and family breakdown whilst allowing the survivor to live free in the property etc.

Given the house value is a very modest £200k and no indication of the gross estate exceeding £325k, a STEP qualified lawyer appears to be overkill. 

Even embedding an IPDI trust for the house in this case, seems of dubious value for an estate a long way from breaching £1 million joint  NRBs. Although I note your other reasons for suggesting an IPDI, just concerned the numbers appear to be too small to justify that complication.

Dandylion

Thanks all for your interesting comments. Sounds like these things need a health warning. 

I’m puzzled why the trust doesn’t exist now, but if a will came into play it would. (Can’t you just shred the will too and go intestate if the effect would be the same?)

Dandylion

Poseidon1 - your comment about an IPDI trust being overkill - would they be wise to go back to being joint tenants, or just stay tenants in common and leave their half to each other in new wills?

Keep_pedalling

Dandylion said:

Thanks all for your interesting comments. Sounds like these things need a health warning. 

I’m puzzled why the trust doesn’t exist now, but if a will came into play it would. (Can’t you just shred the will too and go intestate if the effect would be the same?)

I am not 100% sure about this but I would simply not want to take a risk with it. Even if the clause fails this leaves the estate intestate which is something they may also wish to avoid. I suspect that with a 20 year old will they would want to change the executors as well. So a lot of reasons why they should look to get new wills.

poseidon1

Keep_pedalling said:

Dandylion said:

Thanks all for your interesting comments. Sounds like these things need a health warning. 

I’m puzzled why the trust doesn’t exist now, but if a will came into play it would. (Can’t you just shred the will too and go intestate if the effect would be the same?)

I am not 100% sure about this but I would simply not want to take a risk with it. Even if the clause fails this leaves the estate intestate which is something they may also wish to avoid. I suspect that with a 20 year old will they would want to change the executors as well. So a lot of reasons why they should look to get new wills.

I am with KP on this. 

Dump the old will and initiate new simple wills leaving their half share in the house to each other, and then onto the kids on 2nd death. They should get some quotes from local solicitors and go for the cheapest ( no more  messing around with will writing companies please!)

Their circumstances do not sound complex enough to warrant any degree of elaboration regarding their testamentary wishes.