Trust Case Study

By Vicki McKenzie | May 30, 2023

To discover more on how to set up a trust take a look at our recent blog.

We recently dealt with a third party (non-solicitor adviser) provided our client with a standard document to place a substantial investment in trust to purportedly protect money from future care fees. They are single with no immediate close family or anyone else dependent on them. The non-solicitor adviser was paid more than £12,000 in fees for the financial transaction (*).

The first of many things to consider here is that this older person may want or need this money to fund future care options of their choice. Deliberately depriving yourself of assets so that you are unable to meet your care costs will usually be ineffective. The trustees appointed in this case were one of their nieces and her son. The trust was discretionary with other potential beneficiaries named. 

When the client vaguely told us what they had done they said we would need to contact the adviser for the details because they hadn’t really understood it. They are 90 and their eyesight is beginning to fail. They were feeling worried and upset about it all.

What were the issues that were not considered at the time the trust ‘form’ was filled in aside from the above?

– This person had been persuaded to place a significant proportion of their cash estate into this trust and they did not understand the significance of what they had done or the trust’s inconsistency with the terms of their Will, and what they wanted to happen to their estate when they died.

– They were not advised and helped to make a letter of wishes which was essential as the terms of the trust were discretionary, and therefore flexible so there was inadequate protection for the other non-trustee beneficiaries.

– The beneficiaries of the Will which had been updated only one year previously included the niece trustee as just one of the beneficiaries of the estate along with her brothers.

– The trustee niece does not get on with her brothers and is described by others, including even the adviser who helped to complete the ‘trust form’ (which is the legal trust document) as being ‘a difficult woman’.

– The niece’s son appointed as a trustee was a young man and not an ultimate beneficiary of the trust or the estate.

– The trust arrangements are inconsistent with everything else the client has done before. The attorneys appointed by the Lasting Power of Attorney to help them if they become mentally incapacitated or unable to deal with their own affairs, and the executors of their Will who must distribute the remaining estate on their death are the same people, and yet the trustees of the trust are completely different people.

– The non-solicitor adviser (*) thought it would ‘save money’ to have the one niece and her son as trustees. Better not to involve the solicitor.

Insurance companies and financial advisers will often provide standard trust and trustee documents. They can make trusts seem very standard, easy, and accessible – something we all like, and choose where possible. They are ‘free’ so what’s not to like? It’s just a simple signature on a form. What they don’t deal with is the fall-out further down the line when it turns out the trust’s terms are somehow inappropriate. Then they will rely on the very small print in their standard documents and their terms which say they don’t provide legal advice, and they recommend that you take legal advice to make sure the arrangements are right for you.

The cost of legal advice is almost always unwelcome and often misunderstood or misrepresented, but you need to weigh this cost up against the value of the asset you are putting into trust, and the legal cost of sorting out a problem further down the line if things have gone wrong. We like the saying that the one thing even more expensive than good legal advice, is bad legal advice. The latter is often given by non-legally qualified individuals or organisations with big marketing budgets, and now in the age of AI, even the robots are at it. Excellent outcomes can be achieved when your financial professionals work closely with your legal advisers, and those involved both know and understand all the relevant circumstances.

Get in touch with us for more support or information around Trust’s.


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