Are you a victim of a Family Protection Trust?
Are you a former client of McClure Solicitors? Have you set up a Family Protection Trust with them? Gebbie & Wilson can help you with review the existing arrangements for your trust.
What is a Family Protection Trust?
A Family Protection Trust is a legal arrangement where an individual transfers specific assets into a trust which is governed by a document known as a ‘trust deed’. The assets are transferred from the individual’s ownership into the trust. The result is that the assets are then owned by the trust rather than by the individual. The trust is managed by the appointed trustees, who manage the assets for the benefit of the beneficiaries specified in the trust deed. Often the trust documents include letters of wishes from the client to guide the trustees as to how the beneficiaries shall benefit.
These Trusts are often created with the intention of protecting the client’s home or other assets from care fees or other external risk factors. We frequently find that these trusts do not achieve their intended purpose or even that they have adverse consequences.
Who were McClures Solicitors?
McClures Solicitors were a Glasgow based firm of solicitors who are known for helping their clients set up ‘Asset Protection Trusts’ or ‘Family Protection Trusts’. The firm went into administration in April 2021 and their practice was taken over by the firm Jones Whyte LLP.
What are the issues?
1. Loss of control over assets. Upon creation of the trust the assets subject to it. Often these assets are the client’s home or other assets such as investments or policies. Where professional trustees are appointed this means that the property or asset cannot be sold or otherwise without their involvement. Often this issue only comes to light upon the death of the client or when the client wishes to move house; which can often be too late.
2. Locating and corresponding with professional trustees. Many former clients of McClure’s are unaware that they have ceased trading. Most clients have no way of contacting the professional trustees following closure of their registered offices. Whilst the former McClure’s remain appointed as trustees, the professionals are required to sign legal documents, particularly where a property subject to an ‘Asset Protection Trust’ is to be sold.
3. Inadvertent Inheritance Tax liability – if your property is held in a trust upon your death then it is likely to affect the availability of the Residence Nil-Rate Band for Inheritance Tax. This can only be claimed when a residential property is left to direct descendants. The Residence Nil-Rate Band does not apply when a property is held in most types of Trust. This is because the property is owned by the trust and does not form part of your estate. Also, if you remain living in the property at your death, then for Inheritance Tax purposes, you are deemed to have reserved a benefit in the property which means the value is included in your estate (even though it is held in trust). This means that the value of your estate increases and your estate would not benefit from all the available allowances against Inheritance Tax. In most cases the existence of an ‘Asset Protection Trust’ upon a person’s death gives rise to an Inheritance Tax liability, which may not have been incurred had the trust not been set up. Should you decide to terminate the trust during your lifetime there may be an Inheritance Tax charge depending on the value of the trust assets.
4. Ensuring Trust Registration and other Trustee obligations have been complied with. Since 6th October 2020 almost all trusts, even non-taxable trusts, now must be registered with HM Revenue and Customs’ Trust Registration Service. Family Protection Trusts will need to be registered with the Trust Registration Service. If you are unable to contact the trustees of your trust, it is unlikely that you will be able to register the trust accordingly. Personal information is required for trustees as part of the registration process and it is likely that you would not have this information available. Failure to register trusts can result in penalties. There are other Trustee obligations and tax requirements which may not be fulfilled and may incur additional penalties,
How can we help?
Gebbie & Wilson are experienced and qualified solicitors who specialise in dealing with Asset Protection Trusts. We have dealt, and are actively dealing, with a number of these trusts set up by McClures Solicitors. We have the direct contact details of former directors and partners of McClures and are experienced in liaising with these former professionals.
We would be happy to review your current trust arrangements and advise you of your options and the steps to be taken going forward. We will assist you through all aspects of the process and provide you with accurate and honest advice. This may include removing and appointing trustees, transferring the legal title to your property back into your name or winding up the trust.
Louise Arthur is our in-house trusts expert and is a full member of the Society for Trusts and Estate Practitioners (STEP). Contact Louise on 01357 520082 or louise@gebbiewilson.co.uk to find out more about how we can help you.