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We all work hard throughout our lives for a variety of reasons; to provide for our family, to buy property, to keep savings for a rainy day and at some point, to pass something on to our loved ones.
A Family Protection Trust helps to make sure they inherit what we want them to.
Most of us know that by writing a Will, means that after we pass, there is a legal document in place so that those we wish to inherit do. But what about making sure you remain in control of your assets when you are still alive?
The Family Protection Trust has been designed to protect assets during your lifetime and after death, making sure your wishes are taken care of. It is a legal contract where trustees are responsible for holding and protecting your assets. Put simply, it’s like a safety deposit box which you put your assets into. You decide what goes into it and you can take assets out at any time, keeping you in control. You are a trustee along with those you trust to act in your best interests.
You can choose your trustees but it’s recommended that a professional trustee is also appointed as someone who has no financial or personal interest in your assets and so will be expected to agree with your wishes. It will be one of our expert solicitors who act alongside you. They ensure that all your final wishes are carried out and they do not benefit from the trust in any way. The professional trustees are in place to defend your trust and are regulated by the Solicitors Regulation Authority and The Law Society of Scotland.
A trust is set up in your name and you put the majority of your assets into it and retain funds you want to have available for day to day living within your bank account. Additional trustees are appointed so that if you were to lose capacity and are unable to manage your own affairs, others can act in your best interests and administrate the trust.
Assets held in a trust can protect you from various circumstances. If you were to place your home into the trust and at a later stage you went into care, your home would be protected. This means if your house was sold, the proceeds for the sale would be retained within the trust.
The trust remains active for 125 years, even after you have passed. This means that it can stay in place until it’s an appropriate time for your loved ones to inherit. For example, if you had a grandchild who was going through a divorce, you could specify that they inherited after the divorce had been settled.
The Family Protection Trust can be reversed at any time, so if you decide you want to take your assets back out, you can do so.
When you take out a trust with Memoria Estate Planning, the drafting of a Will and Power of Attorney is included. Third party fees are required for the registration of your Power of Attorney with The Office of Public Guardian (£164 in England and £81 in Scotland). Some reductions and exceptions may apply. Some doctors charge for signing a Power of Attorney.
Typically Estate administration takes around six months to complete and can be costly.
You also need to obtain a Grant of Probate/Executry to be able to administer the Estate. Having a Trust in place means that you do not need this to wind up your Estate. Much of the cost and time for administering your Estate will be reduced as most of your assets are in the trust and can be distributed very quickly.
In today’s modern world, families come in all different shapes and sizes and it’s not uncommon for Wills to be contested by family members. This can add a lot of stress to the family as well as take time and cost thousands in legal fees. Unlike a Will, which can be contested up to two years after death, a trust provides protection for your assets allowing them to be distributed as per the instructions you make. Please note, assets outside of the trust can still be subject to claims against the estate. Though if the value of the unprotected assets is low these are often withdrawn.
Families change over the years with marriage breakdowns and new relationships. Many people are concerned about assets being passed on to other families as a result of a second marriage after death. For Example, Mr and Mrs Jones are married for 20 years but sadly Mr Jones passes away. Mrs Jones remarried and her new husband shares the family home with her. On Mrs Jones’ death, typically her new husband would inherit all of her assets which could then be passed on to his children and not Mrs Jones’ children. By having a trust in place allows your spouse to benefit from assets without risk that they will pass on to another family. The trust allows you to ‘lend’ assets to your spouse after your death. These can be returned to the trust upon their death so that your beneficiaries inherit as you wish.
Should you unfortunately lose mental capacity, and are unable to manage your assets, the courts would step in to protect you. However, with a trust in place, your trustees can take control and make decisions on your behalf to avoid courts making decisions for you. This means decisions can be made quicker and will be more personal to you.
Similar to Sideways Disinheritance, many are worried about losing their assets due to marriage breakdown. If you set up your trust prior to marriage and at a later date the marriage breaks down, the assets held in trust will not be taken into account during divorce proceedings, meaning you and your family are protected.
Due to the nature of death, families can inherit at any point. In some situations, it may not be the right time to inherit. For example, if someone is on benefits due to temporarily being unemployed, they may not be entitled to the benefits if they were to inherit money. They may also be struggling mentally and having lots of money at that particular time may not be helpful. The trustees can advise that funds are passed on when the person is in a more stable position and ready to inherit.
Assets held in trust will not be liable for Inheritance Tax, this means assets passed to your children will not be taxed upon their death.
As a consequence of setting up a trust and having the majority of your assets in it means that should you require care, assets within the trust cannot be used to pay for your care. Many people have to sell their property to be able to afford care home fees which can be as much as £1,000 per week.Please note, this protection is only effective if going into care wasn’t a consideration when setting up the trust.
Our friendly team members are available to help and answer any questions you may have.
Protect a lifetime's work for the ones you love
For help and advice call: 0800 007 3750