Can an attorney set up an Asset Protection Trust?

Is is possible for an attorney under a registered P&A LPA to set up an asset protection trust for the donor? The donor has a form of dementia, not sure how severe at the moment. Or does the settlor have to set up the trust herself and appoint her trustees or can her attorneys do it on her behalf as they want to act in her best interests?

Ann Foster
All Wills and Trusts

An attorney under an LPA cannot transfer assets to a trust as this is a form of gift and does not fall into any of the de minimis exceptions.

I would also query the benefit of an asset protection trust to the donor - if the donor has made an LPA allowing an attorney to look after their affairs, how would it be in their interests and what risk is it protecting against? It adds a layer of compliance, complexity and transferring their home into trust would put the RNRB at risk.

My views may be a little coloured because I recently had to consider a revocable “asset protection trust” established for a married couple in 2014. We could not identify any benefit or purpose to the trust.

Andrew Goodman
Osborne Clarke LLP

To Andrew’s answer I would add a threshold question: how, if at all, does the trust protect the assets?

If the intended protection is against creditors, then a settlement of assets on trust may be set aside immediately as a fraud on creditors or may be set aside in the event of bankruptcy or an insolvent estate on death as a transaction at an undervalue. If the intended protection is against care home fees, then the anti-deprivation provisions will disregard the settlement and the donor will be assessed on the basis that they still own the trust assets.

So I agree with Andrew that it is difficult to see the benefit to the donor, but in fact I don’t think it would work in the first place.

Josh Lewison
Radcliffe Chambers

Asset Protection Trusts are always deliberate deprivation, but might not be caught by the guidance if set up at the right time for various good reasons. However, the key test is whether it was reasonably foreseeable, at the time the assets were transferred, that the donor would need to pay for care. If the attorney is asking the question on behalf of a donor who can’t ask themselves then it is imminently foreseeable and will fail.

Iain Cameron