Specialist Trust Solicitors 
Many firms market “lifetime interest trusts,” “asset protection trusts,” “family protection trusts” or “property protection trusts” as if they were a guarantee against care home fees, probate delays and inheritance tax. In reality, these vehicles are often oversold, carry high costs, and deliver very limited protection in ordinary cases. And there are often much better and more effective alternatives
In this page, our experienced and specialist trust solicitors explain:
- What exactly lifetime interest trusts are
- How they differs from other trust types (asset protection, probate preservation, property protection)
- When (if ever) these schemes work, and their pitfalls
- Whether they help with care home fees
- What the proper alternatives are, which we recommend for most people
- How our firm’s specialist inheritance & estate planning team can help you choose a better-suited approach
We adopt a cautious, realistic tone: these arrangement are tools, not magic solutions, and in many cases the downsides outweigh the benefits.
Looking for specialist trust and wealth planning advice? Please call FREEPHONE 0800 1404544 or one of our local office numbers [see below] for FREE initial phone advice from 1 of our experts.
Why Use Our Solicitors for Trusts and Wealth Planning Advice?
Here at Bonallack & Bishop we have a large, highly specialist private client team. It includes Elizabeth Webbe, a highly experienced solicitor who is a Full Member of the Society of Trust and Estate Practitioners – STEP is the leading global professional organisation of lawyers and accountants specialising in tax and wealth management advice. Elizabeth also used to lecture to solicitors nationwide on trusts.
And in addition, we have an in-house tax accountant who works directly with our legal team to provide tailored tax and wealth planning advice.
What Are Lifetime Interest Trusts?
A lifetime interest trust (also called an “interest in possession trust”) is a legal arrangement in which someone (the life tenant) has the right to use or benefit from an asset (e.g. live in a house, receive income) for their lifetime, and thereafter the asset passes to other beneficiaries (the remaindermen).
Key features:
- The life tenant has use or income rights, but not full ownership or control of the capital.
- The “remaindermen” are the people who will receive the asset when the life tenant dies.
- Often used in Wills, so that when a first spouse dies, the surviving spouse can continue living in the home, but the ultimate ownership goes to children or other beneficiaries.
- It allows you to structure who benefits and when.
Lifetime Interest Trusts – How they differs from lifetime/discretionary trusts
A lifetime discretionary or “asset protection” trust gives its trustees broad discretion over who receives what and when.
In contrast, a lifetime interest trust is more rigid. There is a guaranteed life interest, and then a fixed path to remainder beneficiaries.
Property protection/property trust angle
When people refer to “property protection trusts,” they usually mean a scheme that holds real property (typically the home) in an attempt to shield it from future claims (e.g. care fees).
In many cases, the structure is a lifetime interest trust over real property, or a hybrid form combining life interest rights with discretionary powers.
What are the claimed advantages of lifetime interests trusts? And why do people use them
When properly designed, this kind of legal structure can provide some positive benefits. For example, it may offer:
- Continuity of residence/income for a spouse or partner without giving them full ownership of the asset.
- Protection of capital for children or other beneficiaries (especially in second-marriage situations).
- Limiting probate complexity — assets in the trust may pass outside certain probate formalities (although that does not mean that probate will not apply – because assets outside the trust are still potentially subject to probate).
- Clear succession paths — preventing surviving spouses from changing the Will in a way that disinherits children.
- Perceived protection against future liabilities (e.g. care home fees) — though, as we’ll see, that perception is often misleading.
However, those advantages are modest in many real cases, and sometimes heavily outweighed by the drawbacks.
Why These Trusts Are Often Oversold — and Where They Fail
“You can’t trust the marketing”
Many promotional materials for these kind of arrangements promise:
- “Avoid care home fees”
- “Reduce inheritance tax dramatically”
- “Your home is safe forever”
In practice, these claims often misstate or exaggerate the law. As the “Trust or Trap?” report from Lifetime Lawyers (previously known as Solicitors for the Elderly),warns:
“Across the UK, a growing number of people … are being misled into paying thousands of pounds for so-called ‘asset protection trusts’ … many of these trusts are not necessary or appropriate to achieve their objectives” and “many of these schemes provide no such guarantees … lead to hefty legal fees … families being burdened with unexpected tax bills…..”
Third-party criticisms & real-life stories
Don’t just take our word for it. Here are just some of the issues raised by 3rd parties and some real life examples of how appalling these financial vehicles can be:
- The Financial Conduct Authority warned consumers about “mismanagement of ‘asset protection’ trust schemes” in April 2023, going on to recommend that people get proper and specialist advice from members of professional bodies like STEP.
- Both Age UK and the Daily Mail have reported that tens of thousands of people have been mis-sold these schemes
- 2015 saw 8 people receiving prison sentences of up to 4 and a 1/2 years at Nottingham Crown Court for “mis-selling so-called asset protection trusts to elderly clients” as reported by STEP
- A September 2025 article in Today’s Wills & Probate magazine describes these schemes as ‘costly, complex products sold to people who do not fully understand them,’ cautioning that such mis-selling may become a serious consumer scandal.
Care home fee risk: what is deliberate deprivation of assets?
Local authorities have the power to treat you as still owning assets if they believe you moved them away just to reduce your charge. That is often referred to as “deliberate deprivation of assets.”
Even if the trust is valid, the value may still be included in your means test, particularly if the transfer was recent or clearly motivated by care avoidance.
In short beware – lifetime interest trusts may not avoid care fees and may even attract administration costs.
Lifetime Interest Trusts – tax traps and costs
- Trusts face their own tax regimes (income tax, capital gains tax, and possibly IHT at ten-year intervals).
- Entering into this kind of scheme may trigger immediate IHT or “exit charges.”
- Loss of flexibility: once assets go into the trust, the settlor or life tenant often cannot change them easily.
- Trustee costs, legal fees, valuation costs, reporting obligations
Some of these arrangements are set up for “tax planning purposes” where there was actually no tax liability in the 1st place. What’s more, these vehicles can also lead to loss of some available reliefs and allowances on death.
Control and practical difficulties
- The life tenant may depend on trustees to make decisions (e.g. selling the property, dealing with maintenance).
- The trust may limit the life tenant’s ability to access capital, even in hardship.
- Disputes between trustees, beneficiaries, or future changes in circumstances can complicate things.
Timing is critical
If the trust is established too close to when care is needed, it’s far more likely to be challenged. Also, many benefits rely on a “gap” — i.e., the person must not appear to have deliberately stripped assets just before seeking funding.
Do Lifetime Interest Trusts Help with Care Home Fees?
Short answer? Not reliably.
Why they often fail for this purpose
- The local authority may include the property (or its value) under deprivation rules, despite the trust structure.
- The life tenant may still be assessed over their full financial position, including trust-derived benefits.
- If the trust was motivated by care avoidance or established when the settlor was already needing care, it is vulnerable to challenge.
- The trust could be ignored or “pierced” in the means test.
And even with a life interest trust you may still face ongoing administration fees and uncertainties about whether it will actually shield assets.
When may it help a bit?
- When the trust is created long before care is needed, with broader motives (e.g. family wealth planning, protection from remarriage).
- When part of a well-balanced plan, not relied on solely for care fee avoidance.
- In conjunction with other strategies (see below).
But even then, it is no safeguard or guarantee.
Better Strategies to Reduce Care Home Fees or Inheritance Tax
Instead of, or alongside, trusts, you should consider more reliable, flexible, lower-risk approaches. Here are some of the better strategies we often advise:
Care home fee mitigation (this is not the same as avoiding care home fees)
- Genuine lifetime gifts (lower risk if made well in advance, and you survive 7 years for IHT).
- Sever joint ownership / ownership structuring — e.g. hold as tenants in common, with each spouse leaving their separate share in a trust or will.
- Use of life interest clauses in your will (i.e. leave your share of home to spouse for life, then to children).
- Deferred payment or equity release schemes — sometimes you can borrow against the home or defer sale until later.
- Pre-paid care or long-term care insurance (if available).
- Spousal exemptions and transfers between spouses free from IHT / charging.
Inheritance tax mitigation
- Annual gift allowances (currently £3,000 per year)
- Small gift exemptions
- Potentially Exempt Transfers (PETs) (gifts outright to individuals)
- Charitable gifts (if 10% or more, reducing IHT rate from 40% to 36%)
- Use of exemptions, reliefs, and reliefs on business / agricultural property
- Discounted gift trusts, heritage or agricultural reliefs, nil-rate band planning
- Pension planning, since pension assets currently often fall outside one’s estate for IHT – though this exception vanishes in April 2027 from which date pension funds become liable to inheritance tax
- Deferred planning — waiting until circumstances allow (but with care about proximity to ill health).
In short, there are many, and usually much better alternatives to these kind of schemes.
In many cases, a well-structured Will, combined with measured gifting and professional tax planning, gives more certainty and lower cost than elaborate lifetime trust structures.
When would Lifetime Interest Trusts be Sensible?
While we emphasise the risks above, a lifetime interest trust can have a proper role in wealth planning in certain circumstances. For instance:
- A married couple who want the spouse to live in the home for life, but ensure the property ultimately passes to children (especially in blended family situations).
- Circumstances where the life tenant doesn’t need to draw on capital, only income or use.
- When there are genuine motives besides care avoidance (e.g. protection of your assets in case of divorce or remarriage).
- When the trust is drafted by qualified, specialist regulated solicitors (not by aggressive unqualified and unregulated will-writers or others)
- When clients understand and accept the trade-offs (i.e. cost, inflexibility, possible tax risk).
Even then, the lifetime interest trust should only be one part of a broader, flexible wealth planning solution.
Lifetime Interest Trusts – a Hypothetical Case Example
Scenario
Alice (aged 75) and Bob (aged 78) own their home jointly. They have two children, Claire and David. Alice wishes that Bob continue living in the home if she dies but wants Claire and David to inherit her share in the property. Alice is concerned about care home fees depleting “her half” for her children.
What a lifetime interest trust might do
- In her Will, Alice leaves her 50% share into a lifetime interest trust for Bob (life tenant). Bob can live in the property and maintain it but cannot sell or encumber it without trustee agreement. If Bob wants to move, the trustees can contribute their share of the sale proceeds to pay for Bob’s new home.
- On Bob’s death, the 50% share passes to Claire and David.
Pros & cons for this scenario
- Pros: Bob retains use of the home; Alice’s share is earmarked for the children; ensures that remarriage by Bob cannot divert Alice’s share. Alice’s share is not means tested if Bob needs care.
- Cons: Bob cannot monetize the property share (e.g. mortgage or sell) without trustees’ consent. And in addition, there are a number of costs to consider. These include the creation of the trust in the 1st place, ongoing costs, property conveyancing charges involved in transferring ownership of the property and potential tax charges.
This setup is modest and practical, not ambitious. It guards against some risks (remarriage, disinheritance of children) but does not guarantee protection against care costs or tax.
Why You Should Work with Experienced Specialist Solicitors (Not Off-the-Shelf Salesmen)
Because asset protection and lifetime interest trusts are complex and often involve high stakes, the quality of advice matters enormously. Here’s what distinguishes good advice from bad:
- it comes from regulated, expert advisers who are accountable (solicitors tightly regulated by the SRA (Solicitors Regulation Authority), chartered tax advisers, STEP members).
- it comes with a full explanation of costs, conflicts, tax exposure and worst-case scenarios.
- it provides a clear understanding of care funding rules, deprivation of assets, and tax law.
- it involves tailored, flexible planning (not rigid “one-size-fits-all packages”).
- it is accompanied with an ongoing review and adjustment as laws, health or family circumstances change.
How to Spot Mis-Sold Lifetime Interest Trusts
Sadly, many people are persuaded into paying thousands for schemes that do not deliver the promised benefits. Be cautious if you see one or more of the following:
- Big promises – such as “guaranteed to avoid care home fees” or “this will definitely save inheritance tax”.
- High-pressure sales tactics – being told you must “sign today” or risk losing out.
- No regulation or redress – the provider is not a regulated solicitor’s firm, so you have no access to the Legal Ombudsman if things go wrong.
- High fees for simple documents – quotes of £3,000–£5,000 (or more) for a standard trust package that could be unnecessary.
- Lack of tailored advice – no discussion of your personal circumstances, health, tax position, or family situation.
If you spot any of these warning signs, stop and seek advice from a qualified solicitor before signing anything.
Beware of Who Sells These Lifetime Interest Trusts
One of the biggest problems with these kind of legal arrangements is who sells them. In our experience, the worst examples come from:
- Unregulated will-writing companies – Anyone can call themselves a will writer. Many have no legal training and are not regulated or insured. Some charge thousands of pounds for standard documents that are poorly drafted and often unnecessary. in contrast, solicitors are heavily regulated and are covered by a minimum professional indemnity insurance for solicitors of £2 million – many larger firms, including us, covered by much larger insurance policies
- Sales-driven estate planning firms – Some operate like franchises, with call centres and glossy brochures. Their model is to sell as many of these schemes as possible at £3,000–£5,000 a time, regardless of whether the product is right for you.
- Financial advisers without legal expertise – Some advisers promote trusts as part of their estate planning package but lack the specialist knowledge of inheritance tax and care funding rules. This can lead to expensive mistakes.
- Probate and trust companies with no regulation – When these businesses collapse, families are left stuck with complex structures, unexpected tax bills and no support.
By contrast, solicitors are regulated, insured, and accountable. Our team specialises in wealth and inheritance tax planning and will only recommend a trust if it genuinely suits your circumstances.
If a simpler, cheaper solution works better, we’ll tell you so.
Lifetime Interest Trusts – a Summary & What to Ask Next
Key takeaways:
- Lifetime interest trusts are legitimate tools, but not magic bullets.
- They can help with succession, spouse protection, and restricting control, but do not reliably shield from care home costs or IHT.
- The marketing around “asset protection trusts” and “probate preservation trusts” is often exaggerated, and many clients pay high fees without corresponding benefit.
- Timing, motive, control, and structure are everything — mistakes or poor advice can backfire.
- Better strategies often lie in careful gifting, smart Will design, pension planning, and exploring care funding options.
Your next steps?
- Contact us for FREE initial phone advice from 1 of our experts about your assets, family situation, and wealth planning concerns.
- We’ll review whether a lifetime interest trust is appropriate for you, or whether better alternatives exist.
- If a trust is beneficial, we will draft a fully tailored, flexible trust (or Will-based trust) with full cost transparency.
We invite you to contact our specialist inheritance & wealth planning team today. We focus on sensible, cost-aware, ethically grounded solutions — not overly hyped trust marketing.
