Whether you refer to them as ‘Asset Protection Lifetime Trusts’, ‘Asset Protection Trusts’, ‘Family Protection Trusts’, or ‘Property Protection Trusts’, a Lifetime Trust is a tool which enables you to protect your property or assets whilst you are alive. Read on to find out all about lifetime trusts and probate fees.

Unlike Will Trusts which are used after your death, a Lifetime Trust allows you to gift your property or other assets into a Trust whilst still using the asset and living in the property. The advantages in doing this are great, some of the biggest being:

• Reducing Probate Fees

You can create a Lifetime Trust and transfer the majority of your assets  (if less than £300,000) into it. If you do, then when you die, probate feed in the UK will not be need to be paid, saving you unnecessary costs and your estate may be administered right away. I

f the Government does decide to enact the Probate Fees they postponed in 2017, this could be a saving of several thousand pounds.  Your estate may also be administered right away.

• Sideways Disinheritance

When one person from a couple dies, the survivor usually inherits the deceased person’s assets.  If the survivor then remarried, those assets may pass to a new spouse if they do not protect them.  By placing assets in a Lifetime Trust before death, this protects any children and other family members’ inheritance and removes the risk of those assets being inherited by someone else’s family.

• Dependants Claims On Your Death

Regardless of whether you write a Will or not, people can come forward to claim a share of your estate.  Assets placed in a Lifetime Trust are protected from these claims.

• Children In Vulnerable Circumstances Inheriting 

It is not uncommon for individuals to have problems such as alcohol and drug dependency, gambling, or money problems.  Assets in a Lifetime Trust, can have discretionary conditions put in place as to when inheritance is passed on.

• Reducing the burden of Care Costs

At present 1 in 3 women and 1 in 4 men over 65 are likely to go into care. As for the next generation (those aged between 45 and 65) it is anticipated that 1 in 2 will go into care.  Assets held in Trust are normally disregarded for care purposes provided that the Trust has been set up correctly with the assets being ‘ring-fenced’ at the right time.  

If you were fit and independent when creating the Trust and could not have foreseen the need for care then the local Authority cannot assume that you set up the Lifetime Trust to avoid care home fees. 

What Can I Place In A Lifetime Trust?

Clients often put their properties in trust (or their share of it) along with most other savings and investments.

They do this to ensure that they pass to the people they want after their death, according to the terms of the Trust, or under the terms of what you write in a Will. The inheritance due to any beneficiary who is not in a good position to inherit can be protected by the asset trust and be passed to them at a more appropriate time.

If you originally chose to leave everything to your surviving spouse or partner, but have children from a previous relationship or marriage that you would like to benefit, then the Trust can be used to protect their intended inheritance. 

The value of the Trust will not be eroded by the cost of administering your estate (due to probate fees) or by the cost of residential care in later life, if needed.

When the Trust ends, your Trustees will pass the assets to your beneficiaries without having to follow any complicated procedures. It operates for you as a lifetime property protection trust.

What Is The Difference Between Will Trusts And Lifetime Trusts?

Both types of Trusts are Discretionary but the main difference is that a Will Trust is set up on death and the Settlement is the assets that are left on death. Lifetime Trusts are set up during lifetime, and the Settlement occurs immediately. The Settlement can be minimal with the rest of the assets passed into the Trust upon death.

The main benefit of a Lifetime Trust is that it allows you to gift assets during your lifetime. Rather than giving money directly to your children, which comes with the risk of losing it in a divorce, the Trust will lend the money to your children which means that the assets are protected.

Downsizing Your Home

You might decide to downsize your house so that you would have money in later life to give to your children. With a Lifetime Trust, if you were to live for seven years after making a gift, you could then use your nil-rate band allowance more than once.

Certainty

The main advantage of using a Lifetime Trust is that it uses the existing rules which means that you know and understand what the rules are when you open it. It also means that if you create a Trust during your lifetime, you have a much higher level of certainty on the rules applied than one created upon your death which could be 50 years later (in which  rules can change).

Like all matters related to Estate Planning and inheritance tax, taking expert advice is essential. Please contact us if you require any help.

If you need any advice on probate fees or how to write a will, we offer a straightforward and cost effective service. You will have peace of mind that your affairs are taken care of and those loved ones are considered in the decision making process.