What is an Asset Protection Trust?

For homeowners in England and Wales, protecting the family home and savings is one of the most important financial decisions you will ever make. An Asset Protection Trust (APT) is a legal arrangement — not a legal entity — that places your assets under the care of trustees, shielding them from threats like care fees, divorce, bankruptcy, and sideways disinheritance.

Navigating estate planning can feel overwhelming, but the core idea behind an APT is straightforward. You transfer assets — most commonly your home — into a trust, where they are held and managed by trustees for the benefit of your chosen beneficiaries. Because the assets are no longer in your personal estate, they gain a layer of protection against a range of financial risks that could otherwise erode your family’s wealth.

At its core, an APT is about safeguarding your legacy. As Mike Pugh, founder of MP Estate Planning, often says: “Trusts are not just for the rich — they’re for the smart.” It’s a proactive step that can protect everything you’ve worked for, giving you and your family genuine peace of mind.

Key Takeaways

• An Asset Protection Trust is a legal arrangement that protects your assets from care fees, creditors, divorce, and other threats.
• APTs are particularly valuable for homeowners in England and Wales — with the average home now worth around £290,000, ordinary families are increasingly exposed to inheritance tax and care fee risks.
• Assets held in a properly structured trust bypass probate entirely, meaning trustees can act immediately without waiting months for a Grant of Probate.
• Understanding the different types of trusts available — particularly discretionary trusts — is essential for effective estate planning.
• APTs help ensure that your assets pass to the people you choose, in the way you choose, regardless of what life throws at your family.

Understanding the Basics of Asset Protection Trusts

At the heart of effective estate planning lies the Asset Protection Trust — a legal arrangement (not a legal entity) designed to shield assets from financial risks. Under English trust law — which has existed for over 800 years — the trustees become the legal owners of the trust assets, while the beneficiaries retain the beneficial interest. This separation of legal and beneficial ownership is the foundation of all trust-based asset protection.

Definition and Purpose

An Asset Protection Trust is a trust arrangement where assets are transferred to trustees who hold and manage them for the benefit of named beneficiaries. The primary purpose is to safeguard those assets from threats including care home fees, divorce settlements, creditor claims, and inheritance tax (IHT). The key benefit of an APT lies in the fact that once assets are properly held in trust, they are legally owned by the trustees — not by you personally — which means they cannot be easily seized by creditors or assessed as your personal capital.

Using an Asset Protection Trust is particularly important for homeowners. With the average home in England now worth around £290,000, and residential care fees running at £1,100–£1,500 per week, a family home can be consumed by care costs in just a few years. Between 40,000 and 70,000 homes are sold annually to fund care in the UK. A properly structured trust can help prevent your home from becoming one of them.

Key Concepts in Asset Protection

Several key concepts are crucial to understanding how APTs function effectively under English and Welsh law:

• Discretionary structure: The vast majority of effective APTs are discretionary trusts, where no beneficiary has an automatic right to income or capital. This discretion is what provides the protection — if no one has a fixed entitlement, creditors and local authorities cannot claim it belongs to any individual.
• Irrevocability: For genuine asset protection and IHT planning, the trust must be irrevocable. A revocable trust offers no IHT benefit because HMRC treats the assets as still belonging to the settlor. Mike Pugh’s trusts use “Standard and Overriding Powers” which give trustees defined flexibility without making the trust revocable.
• Trustee discretion: Trustees have the power to decide when, how, and to whom distributions are made. This is the single most important protective feature of a discretionary trust.
• Separation of legal and beneficial ownership: The trustees own the assets legally; the beneficiaries have a beneficial interest. This distinction — invented in English law over 800 years ago — is the bedrock of trust-based protection.

The following table summarises the key features and benefits of Asset Protection Trusts under English law:

Understanding the basics of Asset Protection Trusts is essential for anyone looking to safeguard their family’s wealth. By grasping the definition, purpose, and key concepts of APTs under English and Welsh law, you can make informed decisions about using an Asset Protection Trust as part of your estate planning strategy.

Benefits of Establishing an Asset Protection Trust

The benefits of creating an Asset Protection Trust are substantial and wide-ranging. By establishing such a trust, you can ensure that your assets are protected against the real-world threats that affect ordinary families — not just theoretical risks, but the care fees, divorce settlements, and IHT bills that erode family wealth every single day.

Safeguarding Assets Against Real-World Threats

One of the primary benefits of an Asset Protection Trust is its ability to protect your home and savings from being depleted. Here are the main threats a properly structured trust can address:

• Care home fees: In England, anyone with assets above £23,250 must self-fund their care. At £1,100–£1,500 per week, a family home can be consumed in just 3–5 years. Assets held in a discretionary trust are legally owned by the trustees, not the individual, so they are not automatically assessed as part of the individual’s capital.
• Divorce protection: With the UK divorce rate at around 42%, protecting family assets from being divided in a beneficiary’s divorce is a genuine concern. If your child inherits a property outright and later divorces, their ex-spouse may claim a share. If that property is held in a discretionary trust, the answer is simply: “What house? I don’t own a house.”
• Sideways disinheritance: If your spouse remarries after your death, your share of the family home could pass to their new partner and their family — completely disinheriting your children. A trust prevents this.
• Creditor and bankruptcy protection: Assets held in a discretionary trust are not part of any individual beneficiary’s personal estate, providing protection if a beneficiary faces financial difficulties.

Estate Planning Advantages

Beyond direct asset protection, APTs offer significant estate planning advantages that benefit your whole family:

Key estate planning benefits include:

• Bypassing probate delays: When someone dies, all solely-owned assets are frozen until a Grant of Probate is issued — a process that currently takes 3–12 months, and longer when property is involved. Assets held in trust bypass probate entirely. The trustees can act immediately, ensuring your family isn’t left without access to their home or funds during an already difficult time.
• Privacy: A will becomes a public document once probate is granted — anyone can obtain a copy for a small fee. Trust deeds, by contrast, are private documents. The Trust Registration Service (TRS) is not publicly accessible, unlike Companies House.
• Inheritance tax planning: Depending on the type of trust used, an APT can help reduce or manage IHT exposure. For example, a Gifted Property Trust can remove 50% or more of your home’s value from your estate and start the 7-year clock for Potentially Exempt Transfers. The nil rate band has been frozen at £325,000 per person since 2009 — confirmed frozen until at least April 2031 — meaning more ordinary homeowners are caught by IHT every year as property values rise.
• Protecting inheritances: A trust ensures that assets pass to the people you choose, in the manner you choose — regardless of a beneficiary’s divorce, bankruptcy, or poor financial decisions.

By understanding the real, tangible benefits of Asset Protection Trusts under English law, you can make informed decisions about protecting your family’s future. We strongly recommend consulting with a specialist — as Mike Pugh puts it: “The law — like medicine — is broad. You wouldn’t want your GP doing surgery.” Trust planning is no different.

Types of Asset Protection Trusts

Asset Protection Trusts come in several forms under English and Welsh law, each designed to address different family circumstances and planning objectives. When considering setting up an asset protection trust, it’s essential to understand which type is right for your situation.

Discretionary Trusts

Discretionary trusts are by far the most common and most protective type of APT — accounting for the vast majority of trusts created for asset protection purposes. In a discretionary trust, no beneficiary has any automatic right to income or capital. Instead, the trustees have absolute discretion over when, how, and to whom distributions are made. This is the key feature that provides protection against care fees, divorce, and creditor claims. Discretionary trusts can last up to 125 years and are subject to the relevant property regime for IHT purposes — but for most family homes valued below the nil rate band (£325,000), the periodic charges are zero.

Interest in Possession Trusts

Interest in possession (IIP) trusts give one beneficiary (the “life tenant”) the right to income or use of the trust property during their lifetime — for example, the right to live in the family home. When the life tenant’s interest ends (usually on death), the capital passes to the “remainderman” (typically the children). IIP trusts are commonly used in will trusts to prevent sideways disinheritance — ensuring that a surviving spouse can continue living in the home, but that the property ultimately passes to the settlor’s children rather than a new partner. Post-March 2006 IIP trusts are generally treated as relevant property for IHT purposes unless they qualify as an Immediate Post-Death Interest (IPDI) or disabled person’s interest.

Specialist Trust Solutions

Beyond the standard trust types, there are specialist trust products designed for specific planning needs. For example, MP Estate Planning offers several tailored solutions:

• Family Home Protection Trust (Plus): Protects the family home from care fees whilst retaining IHT reliefs including the Residence Nil Rate Band (RNRB).
• Gifted Property Trust: Removes 50% or more of the home’s value from your estate whilst avoiding the Gift with Reservation of Benefit rules, and starts the 7-year clock for IHT purposes.
• Settlor Excluded Asset Protection Trust: Designed for buy-to-let and investment properties where the settlor needs to be fully excluded from benefit.
• Life Insurance Trust: Directs life insurance payouts into trust to avoid the 40% IHT charge. Typically free to set up.

For more information on how to protect your family home specifically, you can visit our page on the Family Home Protection Trust.

When choosing the right type of asset protection trust, it’s crucial to consider your individual circumstances, family dynamics, and the specific threats you want to protect against. Working with a specialist who understands asset protection trust services under English law — rather than a general-practice solicitor — ensures that the trust is properly structured for your needs.

How to Create an Asset Protection Trust

Setting up an asset protection trust involves several key steps, and getting them right from the start is essential. A poorly drafted trust can be worse than no trust at all — so specialist advice is critical.

Steps to Establish a Trust

To establish an asset protection trust under English and Welsh law, you need to follow these steps:

• Get a specialist assessment: Before anything else, a trust specialist should analyse your specific situation — your assets, family structure, and the threats you face. MP Estate Planning uses its proprietary Estate Pro AI software to run a 13-point threat analysis, identifying exactly where your estate is vulnerable.
• Choose the right type of trust: Not all trusts are created equal. A discretionary trust is right for most families, but the specific product (Family Home Protection Trust, Gifted Property Trust, etc.) depends on your circumstances.
• Draft the trust deed: This is the legal document that establishes the trust, sets out the trustees’ powers, and identifies the class of beneficiaries. It must be professionally drafted — a DIY trust deed from the internet is a recipe for disaster.
• Appoint trustees: You need a minimum of two trustees. The settlor can be one of the trustees, which means you can remain involved in decisions about your assets.
• Transfer assets into the trust: For property without a mortgage, this involves a TR1 form to transfer legal title to the trustees at the Land Registry. For mortgaged property, a Declaration of Trust transfers the beneficial interest while legal title remains with the mortgagor until the mortgage is cleared. A Form RX1 restriction is placed on the title.
• Register with the Trust Registration Service (TRS): All UK express trusts must be registered within 90 days of creation. This register is not publicly accessible.

For more detailed information on the different types of trusts and how they work, you can visit our website at https://mpestateplanning.uk/ to explore your options.

Choosing the Right Trustee

Selecting the right trustees is one of the most important decisions in the process. Under English law, the trustees are the legal owners of the trust assets and have a fiduciary duty to act in the best interests of the beneficiaries. You need people you trust implicitly — and at least two of them.

When choosing trustees, consider the following factors:

1. Trustworthiness and reliability: Trustees will have legal control over your assets. Choose people who will act responsibly and in accordance with your wishes.
2. Practical ability: Trustees need to be capable of managing property, making financial decisions, and dealing with administrative requirements like TRS registration and tax returns.
3. The settlor as trustee: In most of Mike Pugh’s trusts, the settlor is appointed as one of the trustees. This means you keep day-to-day control over your assets while benefiting from the trust’s protection. It’s a common misconception that putting your home into a trust means losing control — in practice, you remain involved.

The trust deed will also include clear provisions for removing and replacing trustees, and a letter of wishes provides guidance to trustees about how you’d like the trust to be managed — though it is not legally binding, it carries significant moral weight.

When you compare the cost of setting up a trust — typically from £850 for straightforward arrangements — to the potential loss of your entire home to care fees (£1,100–£1,500 per week), it’s one of the most cost-effective forms of protection available. That’s a one-time fee equivalent to roughly one or two weeks of care, versus ongoing costs that could continue until your assets are depleted to £14,250.

Legal Considerations for Asset Protection Trusts

The legal considerations for Asset Protection Trusts under English and Welsh law are significant, and understanding them is essential for effective planning. Getting the legal details right is the difference between a trust that genuinely protects your family and one that falls apart when challenged.

Relevant Laws and Regulations

APTs in England and Wales operate within a well-established legal framework that has developed over 800 years. Key areas of law that affect your trust include:

• Trust law fundamentals: The separation of legal and beneficial ownership is the foundation. Trustees hold legal title; beneficiaries have the beneficial interest. This distinction is what makes the entire structure work.
• Inheritance tax rules: IHT is charged at 40% on estates above the nil rate band (£325,000 per person, frozen since 2009 and confirmed frozen until at least April 2031). The Residence Nil Rate Band adds up to £175,000 per person but is only available if a qualifying residential interest passes to direct descendants — children, grandchildren, or step-children. It is not available for nephews, nieces, siblings, friends, or charities. A married couple can potentially combine their allowances for a total of up to £1,000,000 (£650,000 NRB plus £350,000 RNRB), though the RNRB tapers by £1 for every £2 the estate exceeds £2,000,000. Understanding how your trust interacts with these thresholds is critical.
• The relevant property regime: Discretionary trusts are subject to potential entry charges (20% on value above available NRB — usually zero for a typical family home), periodic 10-year charges (maximum 6% — again, usually zero for most family homes below the NRB), and exit charges (proportional to the last periodic charge — typically less than 1%).
• Gift with Reservation of Benefit (GROB) rules: If you give away an asset but continue to benefit from it — for example, gifting your home but living in it rent-free — HMRC treats the asset as still in your estate for IHT purposes, even if you survive more than 7 years. Properly structured trusts navigate these rules carefully. The Pre-Owned Assets Tax (POAT) rules may also apply where GROB does not but you continue to benefit from a formerly-owned asset, resulting in an annual income tax charge.
• Trust registration: All UK express trusts must be registered with the Trust Registration Service within 90 days of creation, complying with the 5th Money Laundering Directive. Trustees must also file SA900 trust tax returns where required.

Working with specialist trust practitioners — rather than a general-practice solicitor — is essential to navigate these complexities correctly.

Common Legal Pitfalls to Avoid

When creating an APT, there are several legal pitfalls that can undermine the entire arrangement:

By understanding these potential pitfalls and working with a trust specialist from the outset, you can ensure your APT is properly structured to protect your assets.

Effective asset protection trust planning requires specialist knowledge of English trust law, IHT rules, and care fee legislation. Plan years in advance — you cannot transfer assets after a foreseeable need for care arises. As Mike Pugh says: “Plan, don’t panic.”

Funding Your Asset Protection Trust

To effectively protect your assets, you need to understand how to properly fund your Asset Protection Trust. Funding an Asset Protection Trust means transferring legal or beneficial ownership of your assets to the trustees — and getting this process right is essential for the trust to work as intended.

Types of Assets Suitable for Protection

Various types of assets can be placed into an Asset Protection Trust under English law. These include:

• The family home: This is the most commonly protected asset. With the average home in England worth around £290,000, it’s often a family’s single largest asset — and the one most vulnerable to care fees and IHT.
• Buy-to-let and investment properties: These can be placed into a Settlor Excluded Asset Protection Trust, which removes them from the settlor’s estate entirely.
• Savings and investments: Cash, ISAs, and investment portfolios can be transferred, though the tax treatment varies depending on the trust type.
• Life insurance policies: Writing a life insurance policy into trust is one of the simplest and most effective estate planning steps. Without a trust, a life insurance payout forms part of your estate and could face a 40% IHT charge. In trust, it bypasses your estate entirely — and setup is typically free.

Valuation and Transfer of Assets

The process of valuing and transferring assets into the trust depends on the type of asset and whether it carries a mortgage.

Valuation Process

Assets should be valued at the point of transfer. For property, this typically requires a professional valuation or estate agent’s appraisal. This valuation is important for several reasons: it establishes the value for any potential IHT entry charge (though for most family homes below the nil rate band of £325,000, this charge will be zero), and it provides a baseline for future CGT calculations. Transferring your main residence into trust normally does not trigger a CGT charge because Principal Private Residence relief applies at the point of transfer. Holdover relief may also be available when assets are transferred into or out of certain trusts, deferring any immediate CGT liability.

Transferring Assets

The transfer process depends on whether the property has a mortgage:

By understanding the types of assets that can be protected and the correct transfer process for each, you can effectively fund your Asset Protection Trust. This not only safeguards your assets but also ensures compliance with HMRC requirements and Land Registry procedures.

Asset Protection Trusts vs. Other Strategies

Asset Protection Trusts are just one tool in the estate planning toolkit — so how do they compare with other approaches available under English law?

When considering asset protection, it’s important to understand what each option actually achieves — and, critically, what it doesn’t. Many people assume that a limited company or LLP provides the same protection as a trust, but the reality under English law is quite different.

Comparing with Limited Companies and Other Structures

Here’s how APTs compare with some common alternatives:

• Limited companies and LLPs: These provide a separation between personal and business assets and are useful for trading activities. However, they do not provide the same level of personal asset protection as a trust. A family home cannot simply be “put into a company” without significant tax consequences (Stamp Duty Land Tax, CGT, and ongoing Corporation Tax on any gain). Companies are also subject to public disclosure at Companies House — anyone can look up your company’s assets and accounts.
• Outright gifts: You could simply give your home away to your children. But this creates enormous risks: the recipients could divorce, go bankrupt, or simply sell the property. You’d also lose all control and potentially face the Gift with Reservation of Benefit rules if you continue living there. And you’d be relying on your children’s goodwill for a roof over your head.
• Wills alone: A will only takes effect on death and goes through probate — meaning delays, public disclosure, and vulnerability to challenges. A will provides zero protection during your lifetime against care fees or other threats.
• Asset Protection Trusts: Provide the most comprehensive solution. You can remain as a trustee (keeping control), assets bypass probate, the trust deed is private, and a discretionary structure protects against care fees, divorce, creditors, and sideways disinheritance — all in a single arrangement.

Understanding the Limitations

While APTs offer robust protection, it’s important to be realistic about what they can and cannot do:

• Timing matters: You must plan years in advance. If you transfer assets into trust after a foreseeable need for care has arisen, the local authority may treat this as deprivation of assets. There is no fixed time limit for this — the longer the gap between transfer and the need for care, the stronger your position.
• Trusts are not tax avoidance schemes: They are tax-efficient planning tools. You must still comply with IHT rules, the relevant property regime, and HMRC reporting requirements. Trustees must file trust tax returns where required.
• Specialist advice is essential: Trust law is a specialist area. A general-practice solicitor who handles conveyancing and divorce is unlikely to have the depth of knowledge required to draft an effective APT. This is why Mike Pugh always emphasises: “The law — like medicine — is broad. You wouldn’t want your GP doing surgery.”

When deciding on your asset protection strategy, it’s worth considering both the upfront cost and the potential cost of not acting. When you compare the cost of a trust to the potential costs of care fees or family disputes, it’s one of the most cost-effective forms of protection available.

Common Misconceptions About Asset Protection Trusts

Asset Protection Trusts are surrounded by myths and misunderstandings — many of which come from confusing the US system with how trusts actually work under English and Welsh law. Let’s clear up the most common ones.

Myths Debunked

Here are the misconceptions we encounter most frequently, and the reality behind each:

• “Trusts are only for the wealthy.” This is perhaps the most damaging myth. With the nil rate band frozen at £325,000 since 2009 and the average English home worth around £290,000, ordinary homeowners are now firmly in IHT territory. Trusts are not just for the rich — they’re for the smart.
• “Putting my home in trust means I lose control.” In most Asset Protection Trusts, the settlor is appointed as one of the trustees. You continue living in your home and making decisions about it — the difference is that legal ownership is held by the trustees collectively, which is what provides the protection.
• “Trusts are a way to avoid paying tax.” Trusts are a legitimate, tax-efficient planning tool — not a tax avoidance scheme. They’ve been part of English law for over 800 years. HMRC has clear rules for how trusts are taxed, and all obligations must be met. The goal is to ensure you don’t pay more tax than you legally need to.
• “It’s too late to set up a trust.” While timing is important — particularly for care fee planning — it’s rarely “too late” for at least some form of protection. Even if care fee protection is no longer possible, a trust can still protect against IHT, probate delays, divorce, and sideways disinheritance.
• “Trusts are too expensive.” A straightforward trust starts from around £850. When you compare that to care fees of £1,100–£1,500 per week, or a 40% IHT bill on a £290,000 property, the cost of a trust is equivalent to roughly one or two weeks of care — a one-time fee versus potentially years of ongoing costs.

Let’s examine these myths with a clear comparison:

Clarifying Intent and Use

Asset Protection Trusts exist for a wide range of legitimate purposes. When MP Estate Planning establishes a trust, there are typically nine or more documented legitimate reasons for the arrangement — including protecting against sideways disinheritance, bypassing probate delays, preserving assets for future generations, and managing IHT exposure. Care fee protection is an ancillary benefit of the trust structure, not the primary stated purpose.

To illustrate with a practical example: consider a couple in their 60s who own a home worth £350,000. Without a trust, if one partner eventually needs residential care, the local authority will assess that home as part of their assets. The entire property could be sold to fund care at £1,200+ per week. With a properly structured trust established years in advance, the home is legally owned by the trustees, not the individual. The surviving partner continues living there, the children’s inheritance is protected, and the family avoids the devastating scenario of losing the family home.

As Mike Pugh says: “Not losing the family money provides the greatest peace of mind above all else.” Asset Protection Trusts are not an exotic or complex concept — they are a practical, time-tested legal arrangement available to any homeowner who wants to protect their family’s future.

Maintaining Your Asset Protection Trust

The success of an Asset Protection Trust doesn’t end with its creation — ongoing management is what keeps it effective and legally robust. A trust that is set up and then forgotten can become vulnerable to challenge, and you may miss opportunities to improve your family’s position as circumstances change.

Ongoing Management and Compliance

To maintain your Asset Protection Trust properly, there are several ongoing responsibilities:

• Trust Registration Service (TRS): Your trust must be registered within 90 days of creation, and any changes to trustees, beneficiaries, or trust details must be updated on the register. While the TRS is not publicly accessible, keeping it current is a legal requirement.
• Tax returns: Where the trust receives income or realises capital gains, trustees must file an SA900 trust tax return with HMRC. Trust income is taxed at 45% (39.35% for dividends), with the first £1,000 at basic rate. Capital gains are taxed at 24% for residential property and 20% for other assets, with the annual exempt amount set at half the individual level.
• Periodic 10-year charges: Every ten years, HMRC assesses whether a charge is due on discretionary trust assets above the nil rate band. For most family homes valued below £325,000, this charge is zero — but trustees need to be aware of the requirement and file the appropriate return.
• Trustee duties: Trustees have a fiduciary duty to act in the best interests of the beneficiaries. They must keep proper records, make decisions collectively, and ensure the trust property is properly maintained and insured.

Compliance is crucial because failure to meet these obligations can result in penalties from HMRC or, in the worst case, undermine the trust’s protective features if challenged by a local authority or in court.

Review and Modification of Trust Terms

Periodic review of your Asset Protection Trust is essential to ensure it remains aligned with your goals, your family’s circumstances, and the current legal landscape. While a well-drafted irrevocable discretionary trust cannot be simply “cancelled,” the trustees’ powers — including the Standard and Overriding Powers in Mike Pugh’s trusts — allow for flexibility in how the trust operates.

Some scenarios that may necessitate a review include:

1. Changes in family structure: Marriage, divorce, the birth of grandchildren, or the death of a beneficiary may all require updating the letter of wishes or considering whether the class of beneficiaries needs adjusting.
2. Changes in financial circumstances: A significant change in the value of trust property — for example, substantial house price growth pushing the property above the nil rate band — may require tax planning adjustments.
3. Legislative changes: The law is not static. The nil rate band has been frozen since 2009 and is confirmed frozen until at least April 2031. From April 2027, inherited pensions will become liable for IHT. From April 2026, Business Property Relief and Agricultural Property Relief will be capped at 100% for the first £1 million of combined business and agricultural property, then 50% relief on any excess. Changes in care fee thresholds, trust taxation, or RNRB rules may all affect your planning.
4. Trustee changes: If a trustee dies, loses capacity, or is no longer suitable, a replacement must be appointed. The trust deed should contain clear provisions for this process.

Keeping your trustees informed and your documentation up to date is the foundation of effective trust management. By prioritising ongoing management and periodic review, you can ensure that your Asset Protection Trust remains a robust tool for protecting your family’s wealth for years — even generations — to come.

The Future of Asset Protection Trusts in the UK

Understanding where Asset Protection Trusts are heading is essential for anyone who wants their planning to stand the test of time. The landscape of asset protection trust planning is evolving — driven by frozen tax thresholds, rising property values, and an ageing population facing increasingly expensive care.

Evolving Trends

Demand for Asset Protection Trusts is growing rapidly — and it’s being driven by ordinary homeowners, not the ultra-wealthy. The nil rate band has been frozen at £325,000 since 2009, while the average English home has risen to around £290,000. This means that a single homeowner with even modest savings on top of their property is now likely to have an IHT-liable estate. The trends in APTs point firmly towards trusts becoming a mainstream planning tool rather than a niche product for the wealthy. England invented trust law over 800 years ago — and today, that ancient legal framework is more relevant than ever for ordinary families.

Discretionary lifetime trusts will continue to be the cornerstone of effective asset protection trust planning, offering the combination of care fee protection, IHT efficiency, bypassing probate delays, and divorce protection that no other single arrangement can match. As Mike Pugh puts it: “Keeping families wealthy strengthens the country as a whole.”

Legislative Changes

Several confirmed and anticipated legislative changes will make trust planning even more important in the coming years:

• Nil rate band frozen until at least April 2031: With no increase in sight, more families will be caught by IHT every year as property values rise. This “fiscal drag” is the single biggest driver of demand for trust planning.
• Inherited pensions liable for IHT from April 2027: Previously, pension pots passed to beneficiaries free of IHT. From April 2027, they will be included in the estate for IHT purposes — potentially adding tens or hundreds of thousands of pounds to a family’s IHT bill.
• Business Property Relief and Agricultural Property Relief changes from April 2026: BPR and APR will be capped at 100% relief for the first £1 million of combined business and agricultural property, then 50% relief on any excess. This affects farming families and business owners significantly.
• Rising care costs: Care home fees continue to rise above inflation. With people living longer and the current capital threshold at just £23,250, more families than ever will face the prospect of losing their home to fund care.

For more detailed information on how recent and upcoming changes affect your estate planning, you can read our guide on 2025 inheritance tax changes and what you need to know.

By staying informed about the future of APTs in the UK and acting before these changes take full effect, you can ensure that your assets are protected for future generations. The best time to set up a trust is always years before you need one — because by the time you need it, it may be too late.

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