Families are being charged up to £5,000 for misleading asset protection schemes that don’t deliver and offer false promises of shielding them from care home fees and inheritance tax.
In what experts are describing as the next mis-selling scandal, people across the UK are being misled into paying thousands of pounds for so-called ‘asset protection trusts’, which are often disguised as ‘asset preservation trusts’, ‘family protection trusts’ or ‘flexible trusts’.
They are sold on the promise they will protect families’ wealth and prevent it being used to pay for care fees or alternatively will move assets out of their estate in order to cut inheritance tax for their loved ones.
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With inheritance tax receipts at record levels as more families are caught by the 40% charge, demand is rising for ways to reduce IHT bills.
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Legitimate trusts set-up by regulated individuals and firms can be used to avoid inheritance tax and control how assets are passed on. However many fraudulent schemes are being misused, offer no real protection and can backfire by triggering unintended legal and tax consequences, exposing families to lasting financial and legal harm, lawyers have warned.
Jade Gani, chair of the Association of Lifetime Lawyers, said: “This is a consumer protection issue hiding in plain sight. Those in vulnerable circumstances, many facing illness or bereavement, are being sold costly, complex products they don’t understand, with little or no access to help when things go wrong.
“Families believe they are protecting their home or inheritance, but instead they’re buying into schemes that are legally risky, poorly explained, and often completely unsuitable. We’re seeing people part with large sums of money on the promise of security, yet they’re buying into risk and uncertainty.”
This not only can lead to financial losses and unwieldy legal costs, but also unnecessary family conflict, emotional stress, and in some cases loss of access to their properties, Gani said.
Mis-sold trusts: Older homeowners at risk
People in vulnerable circumstances – particularly older homeowners – are being aggressively targeted by unregulated firms selling these complex and often worthless schemes, research by the Association of Lifetime Lawyers has found.
The majority (95%) of specialist lawyers – who support older people and the vulnerable – surveyed said they had encountered cases of trust mis-selling.
In the last year alone, lawyers have noticed an increase, with 75% having advised multiple clients who have been mis-sold these schemes. In nearly three in four (70%) cases the victim was an older homeowner who either owned their homes outright, or had significant equity.
More than four in five lawyers (82%) said their clients were misled into thinking the trusts would protect their homes or reduce tax.
Most victims paid between £3,000 and £5,000 for having these complex legal products drawn up that offered no legal protection – when they didn’t fully understand what they were signing up for.
The majority (89%) of these cases involved unregulated providers with two-thirds of the firms behind the sales operating entirely outside any regulatory oversight.
The damage caused by these schemes can be deep and long-lasting, the Association of Lifetime Lawyers warned.
Four in five (82%) lawyers surveyed said the firms selling trusts had appointed themselves as trustees, often without the client’s full knowledge or consent. In parallel, three in four reported clients had suffered financial loss, while a similar number had seen families experience emotional distress or conflict.
‘We’ve faced years of stress and spiralling costs’
Iain and Sheila Wright, a married couple in their early 70s from Edinburgh, originally set-up a so-called ‘asset protection trust’ in 2012 with estate planning law firm McClure Solicitors, which later went into administration in 2021.
“We genuinely thought we were protecting our home and family by setting up a trust, but instead we’ve faced years of stress, spiralling costs, and the risk of losing access to our own money,” they said.
“It has been stressful, confusing and expensive, and we wouldn’t want any other family to go through what we have. We felt completely misled and powerless.”
The Wrights said what worries them most is that this isn’t just their story; thousands of other families are still caught up in the same trap and many more still may not be aware that they too could be affected.
“These trusts are a ticking time bomb for thousands of families. Without expert help, you can lose control of your own home and money,” they said.
The mis-sold trusts are often dressed up as easy answers to complicated financial issues, but there’s no one-size-fits-all solution when it comes to care planning or inheritance.
Before making any major legal or financial decision, especially involving your home, it’s important to speak to a properly qualified and regulated legal professional who you can trust, and ask yourself if this approach is truly the right one for you.
Gani of The Association of Lifetime Lawyers, added: “And if you’ve already bought one of these schemes and are worried, don’t panic – many of our members are helping people successfully exit them, and we can help you find a way out too.”
Warning signs of fake trusts
The Association of Lifetime Lawyers is calling for increased consumer awareness, stronger regulation of unregulated firms, and for more people to seek advice from regulated experts in later-life planning, before agreeing to complex trust arrangements. It also wants a public inquiry to investigate the scale of mis-selling, its impact on vulnerable people, and the urgent reforms needed.
To help the public be more savvy when it comes to spotting the warning signs of unsafe trust schemes, the Association has produced a simple red and green flag guide to help people quickly assess whether an asset protection trust is likely to be safe or potentially risky, and to make informed choices.
Red flags
- Advisers who are not regulated by a legal or financial authority: people or companies who offer estate planning services, without being properly qualified or accountable to a professional body.
- Claims that a trust will protect your home from care fees or eliminate inheritance tax
- Applying pressure and using emotionally manipulative sales techniques when you query aspects of the scheme or ask for time to consider your options
- Firms appointing themselves as trustees without explaining this and discussing other options and asking you to sign over property or asset ownership
- No consideration to whether or not you can undo the planning should your circumstances change in the future
Green flags
- Regulated legal professionals: fully qualified solicitors holding a valid and current practising certificate and regulated by the Solicitors Regulation Authority (SRA) or Law Society of Scotland (LSS); or CILEX Fellow Members (FCILEX) and CILEX Lawyers holding a valid and current practising certificate and regulated by CILEx Regulation
- Clear, written explanation of risks, alternatives, and limitations
- The role of the trustees, including their responsibilities, duties, 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 queries raised, with no time pressure placed on you to make a decision
