The Family Protection Trust
What is a Family Protection Trust?
You could refer to a Family Protection Trust like a safe or strong box, for keeping items that are too large to fit in a traditional safe – like your home.
A Family Protection Trust is established in your name and is for your benefit whilst you are living. For more a more detailed description of Family Protection Trusts and what they can offer you and your family call our Family Protection Trusts team on 08448 247 260 today.
So how does it all work then?
In very general terms, a Family Protection Trust works by holding assets for a certain length of time. After the elapsed time the assets then become exempt from certain things.
As an example, under current Inheritance Tax laws if the asset is held under Trust for 7 years then the asset will carry no liability to Inheritance Tax.
Or if it is held for more than 6 months the Local Authority can no longer use their right of recovery for long term care and care home fees.
For more a more information on what Family Protection Trusts can offer you and your family complete our priority form and we will call you back.
Who does a Family Protection Trust benefit?
In short YOU, and the beneficiaries that you choose.
Some of the additional benefits of a Family Protection Trust are:
- Probate is avoided. Probate can be both time consuming and costly to deal with, for example if you were to use professional executors, the average cost for dealing with probate for an estate of £400,000 is around 4% which is £16,000. As the assets held within your trust are not subject to Probate they can be passed directly to your chosen beneficiaries without the need for Probate.
- In this current economic climate it is entirely possible that one of the beneficiaries could be facing some form of insolvency and should this beneficiary be due to inherit a substantial sum of money this would be taken into account within the insolvency procedure. As this is not a desirable scenario, the Trustees could decide to delay payment from the Trust until the insolvency has been satisfactorily dealt with.
What can go into a Family Protection Trust?
Essentially any of your assets can go into the Family Protection Trust whether these be property, investments or just cash. From a taxation point of view, each individual can have up to £325,000 in their own Trust account (therefore a couple can potentially protect up to £650,000), although technically you can hold any amount of assets within your Trust. Beware though that any amounts above these limits attract taxation of 20%. It is usual that assets under these limits are held within Trust.
Who controls the assets within the Family Protection Trust?
By holding assets within a Family Protection Trust, you do not lose control of those assets, as you are still the primary beneficiary of the trust and a Trustee, and the Trustees act upon your wishes (acting on majority).
What are the costs of care?
If you own assets above £23,000 (2009-2010) and need residential care in later life you are expected to pay for ALL the costs and may have to sell assets such as your home in certain circumstances. However, if you have already placed your assets in to a Family Protection Trust it is highly unlikely that they can be used toward these costs.
Is it worth it?
Placing assets into a Family Protection Trust reduces any costs in relation to administering your estate, and potentially saves your estate being eroded by around £26,000 – £50,000 a year (the average cost of residential care in England and Wales). Doing nothing will mean extra costs and additional work for your family, and the loss of further assets before your death if you need long term residential care. The cost of a trust is usually less than the cost of one month in a residential care home, and less than the cost of probate through a bank or solicitor.
So do I still need a last will and testament?
Yes, your Will is still very important. Any of your Estate that is not in the Family Protection Trust when you die will be dealt with in terms of your Will and any estate which is in the Trust will be dealt with according to the wishes expressed in your Will.
For more information on Wills and Family Protection Trusts and what they can offer you and your family call us on 08448 247 260 today.
