The Real Problem Isn't Trusts. It's Using the Wrong Trust for the Wrong Reason.
Over the weekend, I read another article highlighting a family who felt let down after implementing a "Family Protection Trust." The piece focused on the trust itself, the fees paid, and the eventual inheritance tax bill. As is often the case, the headline suggested the trust had failed.
However, the more important question is: what was the trust actually supposed to do?
A trust is not a product; it is a legal framework. Like any tool, its effectiveness depends entirely upon its purpose. Trusts are often marketed as a single solution to every estate planning concern, but different families face different risks—whether that is protecting a vulnerable child, ensuring assets remain available for future generations, or avoiding risks like sideways disinheritance and bankruptcy. These objectives require different structures.
Unfortunately, many historic arrangements were marketed with broad promises like "protect your home from care fees" or "avoid inheritance tax." While these make for attractive headlines, estate planning is rarely that simple. No responsible adviser can guarantee future care fee outcomes or tax legislation. Good planning is about improving outcomes and creating a framework that provides greater control, flexibility, and certainty.
The most successful trust arrangements are built around protecting someone—a spouse, a child, or a family business—rather than simply avoiding something. When planning begins with those objectives, the conversation shifts from "How do I avoid paying something?" to "How do I ensure the people I care about are protected?"
Trusts remain one of the most powerful tools in estate planning, but the challenge is ensuring the correct trust is used for the appropriate reason. Before implementing any structure, families should understand:
- What specific problem is being solved?
- What can the trust achieve, and what are its limitations?
- What alternatives exist?
- What are the associated risks and costs?
- How should success be measured?
Ultimately, the success of a trust should be judged by whether it achieves the specific objective it was created for, not by the sales brochure. That starts with asking the right questions from the outset.
James Berkeley
Senior Counsel
iTrust121