You should be wary of families who spend up to £5,000 on phony "asset protection" trusts

Lawyers warn that fraudulent schemes are being abused, provide no real protection, and can have unexpected tax and legal repercussions

Families are paying up to £5,000 for deceptive asset protection plans that deliver on their promises to protect them from inheritance taxes and care home costs.

People all over the UK are being duped into paying thousands of pounds for so-called asset protection trusts, which are frequently marketed as asset preservation trusts, family protection trusts, or flexible trusts, in what experts are calling the next mis-selling scandal.

They are marketed on the assurance that they will safeguard families' wealth and stop it from being used to cover care costs, or that they will transfer assets out of their estate to reduce inheritance taxes for their heirs.

As more families are subject to the 40 percent charge, inheritance tax receipts are at record levels, increasing demand for strategies to lower IHT bills.

To avoid inheritance tax and manage the transfer of assets, regulated individuals and businesses can establish legitimate trusts. Lawyers have cautioned that a number of fraudulent schemes are being abused, provide no genuine protection, and can backfire by causing unforeseen legal and tax repercussions, leaving families vulnerable to long-term financial and legal harm.

"This is an issue of consumer protection that is right in front of your eyes," stated Jade Gani, chair of the Association of Lifetime Lawyers. In addition to being sold expensive, complicated products they don't understand, people in precarious situationsmany of whom are dealing with illness or losshave little to no access to assistance when things go wrong.

"Families are investing in legally risky, poorly explained, and frequently totally inappropriate schemes because they think they are safeguarding their home or inheritance. We observe that people are investing in risk and uncertainty while parting with substantial sums of money on the promise of security.

According to Gani, this may result in needless family strife, psychological distress, and in certain situations, loss of access to their properties, in addition to monetary losses and cumbersome legal fees.

Older homeowners are at risk from mis-sold trusts.

According to research by the Association of Lifetime Lawyers, unregulated companies that sell these intricate and frequently useless schemes are actively targeting people in vulnerable situations, especially elderly homeowners.

The vast majority of specialized attorneys who assist the elderly and vulnerable who responded to the survey (95 percent) reported having seen instances of trust mis-selling.

Lawyers have seen a rise in just the past year, with 75% of them having advised several clients who were duped by these schemes. The victims were older homeowners who either had substantial equity in their homes or owned them outright in almost three out of four (70 percent) of the cases.

Over four out of five attorneys (82 percent) claimed that their clients were duped into believing that the trusts would lower taxes or safeguard their homes.

When they didn't fully understand what they were getting into, the majority of victims paid between £3,000 and £5,000 to have these complicated legal products created that provided no legal protection.

Eighty-nine percent of these cases involved unregulated providers, with two-thirds of the companies making the sales functioning completely outside of any regulatory supervision.

The Association of Lifetime Lawyers cautioned that the harm resulting from these schemes can be severe and permanent.

According to a survey of lawyers, four out of five (82 percent) stated that the firms that sold trusts had appointed themselves as trustees, frequently without the clients' full knowledge or consent. Simultaneously, 3 out of 4 clients reported having experienced financial loss, and a comparable proportion had witnessed families go through emotional turmoil or conflict.

We have experienced years of stress and escalating expenses.

A so-called asset protection trust was first established in 2012 by Edinburgh-based Iain and Sheila Wright, a married couple in their early 70s, working with the estate planning firm McClure Solicitors. The trust was put into administration in 2021.

According to them, "We sincerely believed that by establishing a trust, we were safeguarding our house and family, but instead we've faced years of stress, spiraling costs, and the risk of losing access to our own money."

"We wouldn't want any other family to experience what we have, as it has been costly, confusing, and stressful. We felt completely helpless and misinformed.

The Wrights claim that the fact that this isn't just their story and that thousands of other families are still in the same situation, with many more possibly unaware that they could also be impacted, is what worries them the most.

Thousands of families are at risk from these trusts. You risk losing control of your own house and finances if you don't have professional assistance," they said.

Missold trusts are frequently presented as simple solutions to complex financial problems, but there isn't a one-size-fits-all approach to inheritance or care planning.

It's crucial to consult with a trustworthy, duly qualified, and regulated legal professional before making any significant financial or legal decisions, particularly those pertaining to your home. You should also consider whether this is the best course of action for you.

The Association of Lifetime Lawyers' Gani continued, saying: "And if you've already purchased one of these schemes and are concerned, don't worry. We can assist you in finding a way out, and many of our members are assisting people in successfully leaving them.

Red flags of fraudulent trusts.

In order to avoid complicated trust arrangements, the Association of Lifetime Lawyers is advocating for greater consumer awareness, stricter regulation of unregulated firms, and more people seeking advice from regulated experts in later-life planning. Additionally, it calls for a public investigation to look into the extent of misselling, how it affects those who are more vulnerable, and what immediate changes are required.

The Association created a straightforward red and green flag guide to help people quickly determine whether an asset protection trust is likely to be safe or potentially risky and to help them make informed decisions. This guide aims to increase public awareness of the warning signs of unsafe trust schemes.

Warning signs.

Advisors who are not subject to legal or financial regulations are individuals or businesses that provide estate planning services without the necessary training or oversight from a professional association. Claims that a trust will shield your house from care costs or remove inheritance taxes Applying pressure and emotionally manipulative sales techniques when you ask questions about the plan or want more time to think about your options Companies designating themselves as trustees without going over other options with you or asking you to sign over property or asset ownership without taking into account whether you can reverse the planning if your situation changes in the future.

Positive signs.

Fully qualified solicitors with a current, valid practice certificate and regulated by the Law Society of Scotland (LSS) or the Solicitors Regulation Authority (SRA); or CILEX Fellow Members (FCILEX) and CILEX Lawyers with a current, valid practice certificate and regulated by CILEx Regulation Clear, written explanation of risks, alternatives, and limitations The role of the trustees, including their duties, responsibilities, and reporting requirements, is fully explained; transparent fees and proper documentation with all legal terms fully explained to you; patience and understanding with any and all of your questions raised; and no time pressure to make a decision.