A Family Asset Protection Trust is a lifetime trust set up by deed. The family home and sometimes other assets are transferred into it, you usually act as a trustee, and your children are the main beneficiaries. It can protect their inheritance from divorce, bankruptcy and remarriage and avoid probate on trust assets. It typically costs £850 to £2,000.
How a FAPT works
You, as settlor, sign a trust deed and transfer assets into the trust, most often your home. You normally appoint yourself and one or more trusted people as trustees, so you keep a say in decisions. Your children or other family members are named as beneficiaries, and the trust deed sets out how and when they benefit.
Many FAPTs are discretionary, which gives trustees flexibility to decide who benefits and when. Some include a right for the settlors to carry on living in the home.
What a FAPT can help with
- Avoiding probate on trust assets: the trustees already own the home, so it can usually be dealt with without waiting for a grant of probate.
- Protecting children's inheritance: assets held in a discretionary trust are better protected if a beneficiary divorces or becomes bankrupt.
- Preventing sideways disinheritance: assets in trust cannot be redirected by a surviving partner's new Will or new marriage.
- Continuity if you lose capacity: the other trustees can manage trust assets, alongside your Lasting Powers of Attorney for everything else.
- Privacy: trust assets do not appear on the public grant of probate.
What a FAPT cannot promise
- Inheritance tax savings: if you keep living in the home rent free, it is normally treated as a gift with reservation of benefit and stays in your estate.
- Entry and ten yearly charges: transfers above the £325,000 nil rate band can face a 20% lifetime charge, and the trust can face up to 6% every ten years.
- Residence nil rate band: some structures lose the extra £175,000 allowance for a home passing to children.
- Undoing it later: a lifetime trust is hard to reverse, so you must be comfortable with giving up outright ownership.
Who might consider a FAPT?
- Homeowners who want their home to pass to their children without probate delays.
- Blended families worried about sideways disinheritance.
- Parents concerned about a child's marriage, debts or vulnerability.
- People who want trusted family members involved in managing assets now.
Setting up a FAPT step by step
- A specialist reviews your assets, family and goals, and explains the alternatives, such as a Will trust.
- You receive written advice on the tax points and a fixed fee quote.
- The trust deed is drafted, checked with you and signed as a deed in front of a witness.
- Your home is transferred to the trustees and registered at HM Land Registry. A mortgage lender's consent may be needed.
- The trust is registered with HMRC's Trust Registration Service where required.
- You make or update your Will and LPAs so everything works together.
Questions to ask a FAPT provider
- Exactly which assets will the trust hold, and who are the trustees and beneficiaries?
- How is the trust taxed now, on my death and every ten years?
- What happens if I want to move house?
- What are the full costs, including Land Registry fees and ongoing administration?
- Are you regulated or a member of a professional body, and are you insured for trust work?