The Hidden Risks of Trust Mis-Selling in the UK

In recent years, thousands of homeowners across the UK, particularly older individuals, have been targeted by firms promoting so-called “Asset Protection Trusts.” Marketed as a way to shield your home from care fees, reduce inheritance tax, and preserve wealth for future generations, these schemes often promise more than they deliver. Behind the glossy brochures and persuasive sales pitches lies a growing scandal: the mis-selling of trusts.

What Are Asset Protection Trusts?

Asset Protection Trusts (also known as Family Protection Trusts, Flexible Lifetime Trusts, or Estate Preservation Trusts) are legal arrangements where individuals transfer ownership of their home or assets into a trust. The reason behind doing so, is that those assets are no longer considered part of their estate and therefore potentially avoiding care fees or Inheritance Tax.

But here’s the issue: many of these trusts are sold with misleading claims, and the legal reality is far more complex.

The Problem with Mis-Selling

Unregulated firms and aggressive salespeople have flooded the market, offering trust packages that cost anywhere from £3,000 to £5,000. These packages are often sold at free seminars that target elderly individuals or by salesmen going door-to-door. The vulnerable individuals are then pressured into signing up without fully understanding the implications or costs associated with the setting up of these packages.

Common misrepresentations include:

• “Your home will be protected from care home fees.”
• “You’ll avoid inheritance tax.”
• “You’ll retain full control of your property.”

Unfortunately, the truth is often that:

• Local authorities can still assess the value of your home when calculating care contributions, especially if they suspect deliberate deprivation of assets.
• Inheritance Tax benefits are limited and depend on the structure of the trust.
• Once your home is in a Trust, you may lose control over how it’s managed or sold, especially if the Trustees are the firm selling the package.

Legal and Financial Consequences

Many individuals only discover the pitfalls years later, such as when they are trying to sell their home, applying for care funding, or passing assets to loved ones. At this stage some of the issues the individual is likely to encounter include:

• Legal disputes with trustees
• Inability to access equity
• Family conflict over inheritance
• Unexpected tax liabilities

In some cases, the Trust may even be invalid or poorly drafted, leaving the individual exposed and out of pocket.

Who’s Most at Risk?

The elderly, especially those who own their homes outright, are prime targets for these companies. These individuals are often looking for ways to protect their legacy and avoid the high cost of residential care.

What You Can Do

If you’ve been sold a trust and are unsure about its validity or benefits:

• Seek advice from a regulated solicitor or financial adviser.
• Check whether the firm that sold you the trust is regulated by the Solicitors Regulation Authority (SRA) or Financial Conduct Authority (FCA).
• Request a copy of your trust deed and have it reviewed independently.

If you believe you’ve been mis-sold, you may be able to:

• Unwind the trust
• Recover some or all of your money
• Take legal action for compensation

Final Thoughts

Trusts can be powerful estate planning tools, but only when used appropriately and with full transparency. The mis-selling of Trusts is not just a financial issue; it’s a breach of trust in every sense of the word. Protect yourself and your loved ones by staying informed, asking questions, and seeking professional guidance before making any decisions.

If you have been mis-sold a Trust and would like to discuss how we may be able to help, please give our friendly team a call on 0116 212 1000 or 01858 445 480 or complete our Contact Us form.