Elderly homeowners are today warned to be on their guard against greedy salesmen flogging costly and complicated financial products that promise to help preserve their wealth for future generations.
Unregulated legal firms claim that by transferring property and cash into a trust it will protect their assets from care home fees and inheritance tax, as well as avoid the need for probate — the legal right to manage someone’s estate when they die.
But experts warn these complex financial arrangements can be entirely unsuitable for many families and leave them facing hefty legal bills if something goes wrong.
Unregulated legal firms claim that by transferring property and cash into a trust it will protect their assets from care home fees and inheritance tax, as well as avoid the need for probate
Some are also being sold by salesmen with no qualifications or expertise in this area. Many trusted High Street building societies referred customers to unregulated legal services until as recently as 2018.
Our findings come just one week after we warned about a rise in unregulated providers selling expensive probate plans.
In one case, a family is still in limbo a year after their mother died because the company, which sold her a £2,000 plan, won’t help them.
Since then, we have been contacted by worried readers targeted by similar businesses selling other financial planning products such as trusts.
A trust is a legal arrangement for managing assets, for example property, cash and shares. There are many legitimate reasons for setting one up — like when a beneficiary of an estate is too young to inherit.
But, increasingly, trusts are being sold as a way for families to shield their wealth as it means you no longer technically own the assets.
One Money Mail reader says he and his wife were sold a £3,600 ‘Family Probate Preservation Plus Trust’ in February after visiting a local legal firm, Harratts Legal Services, in Stockport, to update his will.
A ‘legal consultant’ from the company visited him at home and said it would help protect their property should they later need care. They were told the Government didn’t publicise the arrangements because it would lose too much income if more people knew.
The 82-year-old, who wishes to remain anonymous, says: ‘My wife and I have lived in this house for 47 years and we wanted to protect it for our children and grandchildren.’
But there is no guarantee their money and home will be safe from care costs. Local authorities will investigate your finances should the need for care arise.
And if it decides there has been a ‘deliberate deprivation of assets’ to avoid paying for care, it can take any funds in the trust into account when calculating how much you owe.
In England, you must have less than £14,250 to be eligible for the maximum funding. In Scotland and Wales, it’s £18,500 and £50,000, respectively.
A Harratts Legal Services spokesman says it will investigate the matter.
Any assets placed in trusts are owned and managed by appointed trustees — usually responsible relatives or friends. But unregulated organisations may appoint themselves as a trustee giving them total control over any wealth you place inside.
Trusted: Many high Street building societies referred customers to unregulated legal services until as recently as 2018
Gary Rycroft, from Joseph A. Jones & Co. Solicitors, says: ‘Trusts are not a silver bullet to avoid legal complexity on death. If you try to use it to avoid care home fees, you are always up against the “deliberate deprivation of assets” rules. Tread carefully with appointing unregulated firms as trustees.
‘You won’t be able to sell your house without their involvement and they may charge fees for their time or disappear altogether.’
One legal services provider, Philips Trust Corporation (PTC), which manages these financial products, went into administration last Friday. The firm had taken over customers of Estate Planning Group, which comprised of The Will Writing Company and Family Trust Corporation.
High Street building societies had referred hundreds or even thousands of customers to these firms between 2005 and 2018.
Many, including the Nottingham, Newcastle and Leeds building societies, are now fielding calls from worried families experiencing difficulties. The Nottingham has even set up a dedicated helpline.
Chris Rumsey’s elderly parents were among those referred by Leeds Building Society in 2012. At the time, his father Philip was 90 and his mother, Valerie, who died in 2013, was 87.
They had visited their local branch to discuss what to do with their savings and were directed to a staff member working in the mutual’s financial services department — who was also a representative of the insurer Aviva.
He had suggested they invest their money in a five-year Aviva savings bond.
But he also proposed they set up a discretionary trust to avoid an inheritance tax bill in the future. They were then visited by a salesman at home who charged a £4,000 fee to put £60,000 of bonds in a trust for each of them.
Chris, 65, who lives in Aylesford, Kent, says his parents believed they were dealing with the building society staff, who they trusted.
But they later discovered the trust had been set up by an unregulated firm called the Family Trust Corporation (FTC), which was later taken over by PTC.
Chris, a former operating theatre technician, understood that the trust wound up if both parents died. But in 2018, he was informed by Aviva that someone from PTC was trying to withdraw money from his mother ’s trust.
‘I was horrified. I told Aviva not to let them take the money,’ he says.
At this point, Chris’s father needed the money for care but PTC refused to let him make any withdrawals.
Eventually, Aviva stepped in but it still took two years for the companies to step down as trustees. It also cost the family £6,000 in legal fees.
Chris says: ‘By the time you pay annual management fees, tax on any dividends, commission charges, withdrawal fees and other costs and expenses, you may as well have paid inherit- ance tax.
‘And you don’t realise that by appointing these firms as trustees you are gifting them your assets.’