How to Protect Your Assets With Trusts

Trusts can be used in various ways, including protecting your assets for your loved ones. You don’t have to have millions in the bank to use trusts to your advantage – anyone can use them to pass assets on more effectively and save a surprising amount of Inheritance Tax. 

Types of Trusts

There are many different forms of trust which you can use to protect your assets from high care fees and high Inheritance Tax (IHT) bills. The type of trust that will be right for you will depend on what you want to do with it, but some of the options include:

  • Family protection trusta family protection trust will allow you, the settlor, to have full access to the assets you place into a trust while alive. This protects your assets from being used to pay for high care fees, allows you to choose when your children inherit and can reduce long probate times and high probate fees.
  • Protective property trustthis form of trust allows you to place your share of your home in trust so that it is protected from high care fees and ensures that your partner or other beneficiaries will receive a share of your home. If you own a property with your partner, you must become tenants in common, in which you will each own 50% of your property. You can then leave that share to each other while it is held in trust by your chosen trustees.
  • Interest in possession trust the beneficiaries of this trust are entitled to all of the income that it provides. However, they are not automatically entitled to any of the assets within the trust that generate that income, and the assets in trust can pass on to whoever you choose. This type of trust is often used for those who remarry after divorce but have children from their first marriage to ensure that all of their loved ones are provided for.
  • Bare trust the most straightforward kind of trust, a bare trust allows you to place assets into a trust that the beneficiaries will inherit when they turn 18. 
  • Mixed trust a mixed trust combines elements from different trusts. The different parts of the trust are subject to the rules that govern each one. 

When establishing a trust, take some time to consider which one is the best for your needs. If you are unsure which trust is right for you, get in touch with the legal experts at The Planning Bee today.

Trusts and Asset Protection

Having a trust in place can protect your assets from many different things, including:

  • Inheritance Tax – IHT is charged at a rate of 40% on the value of your estate over £325,000. The residence nil rate band (RNRB) adds another £175,000, bringing the total IHT-free allowance up to £500,000. Placing your assets into a trust can reduce the IHT you pay on your estate, leaving more to pass on to your beneficiaries. 
  • Care home fees – care home fees are incredibly high, and if you or your partner need care in the future, you may have to face the difficult decision of selling your home to pay the fees. However, with a trust in place, your assets are ring-fenced, and your local council will not be able to use the part held in trust, protecting half of the house’s value. 
  • Children divorcing – as a parent, you will want to protect the inheritance that you leave your child. If your child divorces their spouse, there is a chance that their spouse could take half of the inheritance you leave them – or even more. However, you can mitigate this risk with a trust in place, as assets held in trust are not classed as marital assets and will not be considered in divorce courts. 

Although it is a key benefit of placing your assets into a trust, you cannot do this with the sole purpose of reducing any possible care home fees. This is known as deliberate deprivation of assets, and if your local authority suspects that you have done this, they can challenge you and still treat you as though you own the assets yourself. 

Wills and Trusts 

Having both a Will and trust in place has the best benefits for you and your family. With both in place, you can leave your assets to your loved ones in the most tax-efficient way possible while protecting your assets from divorce or care home fees. 

It is also possible to create a Will trust. This is an arrangement which grants you greater control over what happens to your assets after you pass away, as instead of distributing assets to beneficiaries, they go to trustees who control the assets on behalf of others. You can tailor a Will trust to provide for your spouse, fund education for children or grandchildren, or provide for vulnerable loved ones. 

Will trusts may be a good choice if you want to minimise the amount of IHT payable on your estate, protect your assets from children who are bankrupt or going through divorce, or if you want to ensure any beneficiaries accessing state support will be able to do so with their inheritance. 


Trusts are incredibly useful when it comes to later life planning. Though often neglected or overlooked on behalf of Wills, their benefits are numerous. 

Contact The Planning Bee today if you want to discover how to use trusts to protect your assets. Our legal experts are here to help you get the most out of later life planning.

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