The Risks of Not Having a Family Trust in Place

Estate planning is often overlooked until it’s too late. One of the most effective tools for protecting assets and managing wealth across generations is a family trust. Without one, individuals and families may face several adverse consequences—legal, financial, and personal—that can have lasting effects. Here’s what could go wrong if you don’t have a family trust in place.

1. Unintended Distribution of Assets

Without a family trust, your estate will likely be distributed through your will—or if you don’t have one, under the rules of intestacy. These rules may not reflect your actual wishes. For instance, members of a blended family, an unmarried partner or stepchildren may receive nothing if they are not explicitly mentioned in a will. Even with a will, disputes can arise that lead to delays and costs. A family trust allows you to clearly specify how and when assets are distributed, reducing ambiguity and potential conflict.

2. Exposure to Inheritance Tax (IHT)

Inheritance Tax in the UK is charged at 40% on estates valued over £325,000 (as of 2025). While there are allowances and reliefs available, not having a trust can limit your ability to plan effectively. Family trusts can help reduce IHT liability by moving assets out of your estate, particularly if structured correctly and set up early. Without a trust, your heirs may face large tax bills that could force them to sell family assets such as homes or businesses just to pay the tax.

3. Vulnerability to Care Home Fees

As people age, the risk of requiring long-term care increases. Local authorities can assess your finances to determine how much you should contribute to your own care. Without proper planning, including the use of lasting powers of attorney or a family trust, your assets—especially your home—could be counted in this assessment. This may result in your estate being significantly depleted by care home fees. While “deliberate deprivation of assets” rules prevent people from setting up trusts to dodge fees at the last minute, setting up a trust early as part of legitimate estate planning can offer some protection.

4. Family Disputes and Legal Challenges

Family dynamics can be complex, and disputes over inheritance are becoming increasingly common. Without the clear structure and oversight a trust can provide, family members may contest wills, leading to lengthy and expensive legal battles. A family trust, particularly if professionally managed by trustees, offers a layer of protection against such disputes by clearly laying out rules and reducing opportunities for challenge.

5. No Asset Protection for Beneficiaries

Without a trust, your assets may go directly to beneficiaries, who may then lose them through divorce, bankruptcy, or poor financial decisions. For example, if a child inherits money and later divorces, part of that inheritance could be claimed by their ex-spouse. A trust can ring-fence assets, keeping them protected and ensuring they are used for the intended purpose, such as education, property purchases, or supporting future generations.

6. Inflexibility in Managing Wealth Over Time

A well-structured family trust allows for ongoing management of family wealth. It provides a mechanism for adapting to changing circumstances, such as new tax laws, family needs, or market conditions. Without a trust, you have limited options once your estate passes to beneficiaries. This inflexibility can result in poor financial decisions that erode the value of what you worked hard to build.

Conclusion: Not having a family trust can leave your estate vulnerable to excessive taxes, care fees, family disputes, and poor financial management. While trusts are not suitable for everyone and come with costs and administrative responsibilities, for many families they are a powerful tool for securing wealth across generations. Seeking advice from a qualified estate planner can help determine whether a family trust is right for your specific situation. Planning ahead today could save your loved ones considerable time, money, and stress in the future.