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Wealth preservation schemes – Part 2


Following on from my earlier blog about Wealth perseveration schemes.   So far I’ve covered the points that they are challengeable, they may not save tax overall and may cost more, they may not save fees overall and they may not resolve a misdirection of assets and may even create one.


The other point that the leaflet I have been given raised was the Court will take over your affairs if you lose capacity.  Firstly the best thing to do is create Lasting Powers of Attorney, so that you can choose who manages your affairs if you are unlucky enough to lose capacity.  If you don’t then your loved ones can apply to the Court of Protection to appoint someone to manage your affairs.  So to be clear, it is not the Court taking over, they simply retain oversight of someone else managing your affairs.  Their role is to ensure your affairs are managed properly and in your best interests and that your money is used for you and not anyone else whilst you are alive, so that you estate can ultimately be dealt with in accordance with the wishes expressed in your Will.  The Court of Protection is not some malicious body dealing with your affairs, nor is it draconian in the orders that they make.


So in conclusion, will this scheme save probate, yes might well do, if you transfer enough assets into it, but it won’t save money overall.  Will it avoid Inheritance Tax, no, the Trust is taxable and subject to IHT.  Will it protect your bloodline, it probably will ensure that your bloodline inherit your estate, but what if you want someone who isn’t your blood line to inherit?  And what if someone new comes into your life?  Does it stop claims against your estate?  It can certainly make them harder, but whilst the Court cannot compel Trustees to exercise their discretion, the Court can make orders on the basis that their expectation is that they will exercise their discretion in a certain way.


Can the scheme protect from relationship failure, it can’t prevent the relationship failure, but it can put assets out the of reach of the family Court in some circumstances, so yes, it might well be able to do this in some circumstances.  It will protect disabled beneficiaries, yes it probably can do that, but if you do have a disabled beneficiary, then you should take specialist advice about protecting them.  There are some tax reliefs available for disabled beneficiaries.   It avoids Court of Protection control, yes it probably does, but Court of Protection control is nothing to worry about and depending on who the Trustees of the Trust are, Court of Protection control may be preferable.


Does it protect your estate from bankruptcy, it depends, if you gift your assets into the Trust and live for more than 5 years, those assets are no longer available if you become bankrupt, but any assets outside of the Trust are potentially available to the Trustee in bankruptcy.  But if you hadn’t given your assets away into Trust, then you’d probably never go bankrupt anyway, so whilst it will protect them after 5 years, the point is a bit of a red herring.


Does it protect your estate against care home fees?  It might, sometimes these schemes can work, and sometimes they are challenged, but not always.  It does depend on the circumstances and you would benefit from good advice.


Also, it doesn’t make cappuccino, nor does it cure old age, dementia or cancer!!


One final word, take good balanced advice if you are thinking of one of these schemes, understand the negatives as well as the positives, if it sounds too good to be true, it probably is!