Should You Use a Trust to Protect Your Family’s Assets? 
Many people spend a lifetime building up savings, investments, businesses and property. Understandably, they want those assets to benefit their children, grandchildren and future generations rather than being lost through divorce, bankruptcy, poor financial decisions, care fees disputes or unnecessary inheritance tax. A family trust can be one of the most effective legal tools available to help protect family wealth.
At Bonallack & Bishop, our trust solicitors advise individuals, couples, business owners and families throughout England and Wales on the use of trusts as part of wider estate and inheritance tax planning.
Thinking of setting up a family trust? Looking for specialist solicitors? Call FREEPHONE 0800 1404544 or one of our local office numbers [see below] for FREE initial phone advice.
A properly structured trust can help:
- Protect assets for children and grandchildren.
- Preserve family wealth across generations.
- Provide for vulnerable beneficiaries.
- Help manage inheritance tax exposure.
- Protect assets in blended family situations.
- Control how and when beneficiaries receive money.
- Reduce the risk of family disputes.
- Safeguard assets from financial irresponsibility.
However, these kind of legal vehicles are not suitable for every family or every estate. The key question is often:
Should I use a trust to protect my family’s assets?
The answer depends upon your family circumstances, financial objectives and long-term planning goals.
What Is a Family Trust?
A family trust is a legal arrangement under which assets are held by trustees for the benefit of family members or future generations.
This legal structure separates legal ownership from beneficial ownership. The trustees hold and manage the assets. The beneficiaries receive the benefit of those assets in accordance with the trust terms.
Assets commonly placed into family trusts include:
- Investment portfolios.
- Cash savings.
- Family businesses.
- Agricultural assets.
- Shares.
- Property.
- Life insurance proceeds.
Trusts are governed by a combination of legislation including the:
- Trustee Act 1925.
- Trustee Act 2000.
- Inheritance Tax Act 1984.
- Trusts of Land and Appointment of Trustees Act 1996.
According to family trust solicitors at Bonallack & Bishop, the legal structure of a trust can often provide significantly greater asset protection than a simple outright gift.
Why Families Use Trusts
Most clients do not establish these kind of arrangements solely for tax reasons. In many cases, their primary objective is protecting family wealth.
Common concerns include:
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Protecting Assets for Children
Parents frequently worry that a large inheritance may be received at an age when their children lack the experience or maturity to manage it effectively.
If a child inherits assets outright, the money becomes theirs to spend, invest or dispose of as they choose. A trust allows parents to retain greater control.
For example:
- Funds can be released gradually.
- Trustees can make decisions based on need.
- Capital can be preserved for future life events.
- Assets can be protected from wasteful spending.
If a child is young when a parent dies, a trust may provide financial support throughout childhood while preserving capital for adulthood.
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Trusts for Grandchildren
Many grandparents wish to help younger generations without creating financial problems later.
Leaving money in this way can allow grandparents to:
- Fund education costs.
- Assist with property purchases.
- Provide future financial security.
- Protect inherited wealth from external risks.
If grandparents leave money directly to a grandchild, that grandchild gains full control when they become legally entitled to receive it. The trustees can decide when distributions are appropriate and can continue managing assets for future generations.
For many families, this creates a longer-lasting family legacy.
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Protecting Wealth in Blended Families
Second marriages and blended families create some of the most challenging estate planning situations. A common concern is balancing:
- Financial security for a current spouse.
- Protection of assets for children from a previous relationship.
Without careful planning, assets may ultimately pass in a way that the deceased never intended. For example:
A husband leaves everything outright to his second wife.
She later remarries and updates her Will.
The husband’s children from his first marriage may ultimately receive little or nothing.
A trust can often provide a solution.
If assets are placed into a trust:
- The surviving spouse may continue benefiting from them.
- Children can remain protected as ultimate beneficiaries.
- Future changes in circumstances may have less impact on the intended inheritance.
According to family trust solicitors at Bonallack & Bishop, these kind of legal structures are frequently used to help reduce inheritance disputes within blended families.
Inheritance Tax Planning and Family Trusts
Inheritance tax (or IHT) planning is often an important consideration when establishing a trust. IHT is primarily governed by the Inheritance Tax Act 1984.
Certain trusts may help families:
- Preserve family wealth.
- Utilise available allowances.
- Manage future inheritance tax exposure.
- Protect assets from unnecessary erosion.
Planning must always be tailored to individual circumstances. The IHT treatment of these kind of arrangements can be complex and may involve:
- Entry charges.
- Periodic charges.
- Exit charges.
- Reporting obligations.
Professional advice from specialist solicitors is therefore essential.
A trust established for tax reasons alone may not achieve the desired outcome. The most successful arrangements usually combine:
- Asset protection.
- Family succession planning.
- Tax efficiency.
- Practical administration.
Protecting Assets Across Generations
Many families are no longer thinking only about the next generation. Instead, they are looking at how wealth can be preserved for children, grandchildren and future descendants.
A trust can help create a structured approach to family wealth preservation.
Rather than assets passing outright and becoming fragmented over time, trustees can continue managing assets for the benefit of multiple generations. This may be particularly valuable where assets include:
- Family businesses.
- Investment portfolios.
- Land.
- Agricultural property.
- Significant property holdings.
If preserving family wealth over several generations is a priority,these kind of arrangements may provide greater long-term protection than direct inheritance.
Asset Protection Through Trusts
No legal structure can guarantee complete protection in every circumstance. However, trusts can often provide a significant degree of protection against foreseeable risks.
Depending on the circumstances, these kind of structures may help protect assets from:
- Divorce settlements.
- Financial irresponsibility.
- Bankruptcy.
- Family disputes.
- Claims against beneficiaries.
- External financial pressures.
The effectiveness of asset protection depends heavily on:
- The type of trust used.
- When it is established.
- The documentation.
- The surrounding circumstances.
If a trust is created after claims have arisen or creditors are already pursuing an individual, protection may be significantly reduced. Early planning is generally far more effective.
Choosing Trustees
One of the most important decisions when creating these kind of legal vehicles is selecting trustees.
Trustees have legal responsibilities and duties to beneficiaries. A trustee must:
- Act in beneficiaries’ best interests.
- Exercise reasonable care and skill.
- Manage the assets responsibly.
- Avoid conflicts of interest.
- Follow the trust terms.
Suitable trustees may include:
- Family members.
- Friends.
- Professional advisers.
- Solicitors.
- Accountants.
- Trust corporations.
Many clients choose a combination of family and professional trustees. This often provides a balance between personal understanding and technical expertise.
What Happens If Trustees Make Mistakes?
Trustees are subject to legal duties. If trustees fail to comply with those duties, they may become personally liable in certain circumstances.
Trustees can face difficulties if they:
- Invest imprudently.
- Distribute funds incorrectly.
- Fail to keep records.
- Ignore the trust terms.
- Act in their own interests.
Many trustee disputes arise not through dishonesty but simply because trustees underestimate the complexity of their responsibilities.
Trust Administration
Creating these kind of arrangements is only the beginning. They often require ongoing administration. This may include:
- Record keeping.
- Trustee meetings.
- Tax returns.
- Investment reviews.
- Beneficiary communications.
- Regulatory compliance.
If trustees fail to carry out their duties properly, problems can arise later.
Professional support can help trustees fulfil their responsibilities and avoid unnecessary disputes.
Our family trust solicitors regularly advises trustees on the practical and legal aspects of trust administration as well as acting as professional trustees.
Is a Trust Better Than Giving Assets Away?
Many people ask whether they should simply make gifts instead. The answer depends on the objective.
An outright gift provides simplicity. However, it also means losing control. Once assets are gifted outright:
- The recipient controls them.
- The recipient may spend them.
- The assets may become vulnerable in divorce proceedings.
- The assets may become exposed to creditors.
A trust often provides greater flexibility and protection.
If maintaining long-term control and family protection is important, a trust may be preferable to an outright gift.
Is a Family Trust Right for You?
These kind of legal structures may be particularly worth considering if:
- You have children under 25.
- You have grandchildren.
- You are in a second marriage.
- You have a blended family.
- You own substantial assets.
- You have inheritance tax concerns.
- You wish to preserve family wealth.
- You own a business.
- You wish to protect vulnerable beneficiaries.
Not every family needs a trust. For some families, a well-drafted Will may be sufficient. For others, trust planning forms a critical part of a wider estate planning strategy.
The correct approach depends on your objectives, family structure and financial circumstances.
How Bonallack & Bishop Can Help
Our specialist estate planning and family trust solicitors advise on:
- Family trusts.
- Trust creation and drafting.
- IHT planning.
- Trust administration.
- Trustee appointments.
- Trustee disputes.
- Trust reviews.
- Family wealth protection.
- Asset protection planning.
- Estate planning for blended families.
We take the time to understand your family circumstances and recommend solutions designed to protect your assets both now and for future generations.
Whether you are considering a trust for children, grandchildren, inheritance tax planning or wider family wealth protection, our experienced estate planning solicitors can help.
Contact Bonallack & Bishop today for expert advice on protecting your family’s wealth for future generations.
Family Trust Solicitors – FAQ
Should I use a trust to protect my family’s assets?
A trust can be an effective way to protect family wealth, particularly where there are children, grandchildren, blended families, vulnerable beneficiaries or inheritance tax concerns. The suitability of a trust depends on your personal circumstances and objectives.
Can a trust protect assets from divorce?
A trust may help reduce the risk of inherited assets being lost in divorce proceedings, although no structure can provide absolute protection and each case depends on its facts.
Can a trust protect assets for children?
Yes, it can allow trustees to manage assets for children until an appropriate age or life stage.
Can I leave money to grandchildren through a trust?
Yes. Many grandparents use trusts to provide long-term financial support while allowing trustees to control when and how funds are distributed.
Are trusts useful for blended families?
Yes,they are frequently used to provide financial security for a spouse while ensuring children from previous relationships remain protected.
Who can act as a trustee??
Trustees should be trustworthy, capable of making financial decisions and willing to accept legal responsibilities. Many families appoint a mixture of family members and professional advisers.
Can trusts reduce inheritance tax?
Some trusts can play an important role in inheritance tax planning, although the tax treatment is complex and professional advice is essential.
Can trustees be changed?
In many circumstances trustees can be removed, replaced or additional trustees appointed, depending on the trust terms and applicable law.
Do trusts need ongoing administration?
Yes, most need trustees to handle require ongoing administration, record keeping and potentially tax reporting throughout their existence.
Can a trust protect assets for children?
Yes. A trust can allow trustees to manage assets for children until an appropriate age or life stage.
