Asset Protection Trusts

What is an Asset Protection Trust?

An Asset Protection Trust (or a Discretionary Trust) allows you to put some or all of your estate into a Trust on death; that Trust is then managed by your Trustees, who run the Trust and distribute the contents to your Beneficiaries using your wishes as guidance. A Trust can last 125 years, and is an extremely powerful tool protecting against multiple threats to your estate.

Extraordinary protection for your family wealth

You probably want your wealth to go to your Children and Grandchildren, and not be lost to things like divorce and remarriage-after-death or double-taxation … an Asset Protection Trust can actually achieve this.

Protecting Assets Against Divorce

An Asset Protection Trust can protect what you leave your partner or a child if they get divorced; If you left them money as a direct legacy in a Will, it would be attack-able and they could lose up to 70% of it on divorce – this can potentially happen multiple times and not just to your partner, but your children too, each time taking a slice of what you left. By having the assets in Trust, and not in their estate, it’s no longer attack-able. Why would you want half of what you left your children to potentially go to someone you’ve never met?

Protecting Against Double Taxation

When assets are left in Trust, they’re not in the Beneficiaries estate – so, when a Beneficiary passes away, there’s no tax and the remaining Beneficiaries continue to benefit from what’s in the Trust. Tax is still paid on your death, but what is prevented is that double (or triple) layer of taxation from when the Trust moves from your children to your children’s children, and so on. Wherever possible, we take full advantage of the Nil Rate Band and Residential Nil Rate Band.

Say what you want to happen

Unlike a Will, Asset Protection allows you to say exactly what you want to happen, and not be restricted to a legalistic point-in-time snapshot at the time of death.  You can leave instructions for your Trustees providing guidance, such as whether money should be used for travel or education, purchasing property – you could specify an annual stipend for Guardians who may be looking after your children, to help them cover costs.

How can Kinherit help?

As part of our planning process, we will determine whether a Trust is required to carry out your wishes and recommend if appropriate. Often it will be combined with other Trusts (such as an Interest in Possession Trust) to ensure efficient use of all available IHT thresholds. A Trust is always an optional product in our planning, but there are circumstances where your wishes will require one, such as using a Right to Reside clause within a Will.