While family trusts can help families with estate and tax planning, when poorly written by inexperienced vendors they can do more harm than good, experts tell Spear’s.
A family trust is a legal arrangement where assets are held by trustees for the benefit of family members. However, when inadequately drafted, a trust can work to the disadvantage of beneficiaries, who may find that the setup is not working in their favour in relation to tax, access to property or other important issues.
An example of a family trust which led to significant difficulties for some clients is a case involving the Scottish law firm McClure Solicitors. After selling family trusts to thousands of clients, the firm went into administration in 2021, leaving many people without easy access to their assets. Many of these trusts were presented to clients as a way to shield assets from care home fees. In reality, some clients lost control of their property and were forced to pay high legal bills to regain access to their assets. Police Scotland closed their investigation into the firm in 2025, determining that no criminal activity had taken place, and many of the firm’s clients have yet to resolve issues with their respective trusts.
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Most UHNW families have their estates carefully mapped out by legal experts so there is little doubt over who their money and other assets are going to, who is managing them and how they are being managed. However, there are cases where people have been unsuitably-sold family trusts or have had similar legal documentation deficiently drafted to the detriment of their families.
Well-known UHNWs have also encountered issues with trusts, linked either to poor drafting or a lack of drafting altogether. James Brown, known as the ‘Godfather of Soul’, left trust documents with ambiguous wording following his death in 2006, leading to family members enduring 15 years of litigation before the matter was finally resolved in 2021. The majority of his $90 million estate was intended to go to charity but, because his will omitted a son born after its creation in 2000, family members claimed it was invalid.
There was a similar dispute involving the family trust of the ‘Queen of Soul’, Aretha Franklin. After the singer’s death in 2018, three handwritten wills surfaced, all containing different intentions for her family trust and none of which had gone through the necessary legal processes to be deemed official. After a five-year legal battle, the issue was resolved in 2023 when a jury ruled that a document found in Franklin’s sofa was a valid will.
According to experts in the tax and legal industries, the upselling and poor drafting of ill-positioned family trusts remains an ongoing issue.
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Tax expert Dan Neidle said in a LinkedIn post: ‘This is important. There’s a whole mini industry of unqualified people selling crap trusts.’
‘Sometimes sold as asset protection versus creditors or divorce (which often won’t work),’ he added. ‘Sometimes sold as a way of reducing care home contributions (dubious) and often as tax avoidance (very dubious).’
‘The people selling the trusts are unqualified and unregulated boutiques but quite often legitimate law firms are drafting the documents, which is concerning,’ he said.
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The worst-case scenario with a family trust can put people in a difficult position, argues Roman Kubiak, a private wealth dispute lawyer at Hugh James, who has worked extensively on such cases.
‘In a worst-case scenario, once those assets are deemed to pass into the trust, people lose active ownership of their property as it is then held on trust for the underlying beneficiaries,’ he says. ‘While they are suddenly left with only a lifetime right to occupy the property, if there is a requirement to move the capital, that ability is gone as they have effectively given away the asset.’
Kubiak adds that while UHNW individuals are likely to have teams providing sound financial advice, they should still be cautious when ensuring family trusts reflect their intentions.
‘The higher your wealth, the more caution you need to take and the better investment it is to seek out good legal advice,’ he says.
Those new to being ultra-wealthy should take particular care, Kubiak adds, as they may be less experienced with such legal arrangements.
‘I have found that wealthy individuals have fallen victim to improperly written family trusts, especially those who have come into wealth incredibly quickly and wealthy farming families who have sold land to developers,’ he says. ‘If there is a sudden liquidation of these assets, at the point they are deciding what to do with this capital and are perhaps less financially sophisticated than other HNWs, they can often be hoodwinked by vultures and salespeople rather than specialists.’
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There are red flags to look out for when setting up a family trust, says Clementine Dowley, a partner in Payne Hicks Beach’s dispute resolution division.
‘One red flag would be a service provider making an unsolicited approach and offering a cookie-cutter approach which isn’t tailored to your specific needs. Careful thought needs to be given to what works for a client’s particular circumstances, including what might be appropriate from a tax or family perspective,’ she says.
She adds: ‘As with any industry, there may well be dubious operators willing to take advantage of less experienced or more vulnerable clients. It can be easy to be taken in if you haven’t been involved with trusts previously or aren’t certain about what level of service to expect.’
Dowley argues that the best approach is caution before signing any legal document.
‘The best thing to do is to make sure you’re properly advised up front. It is, of course, much better not to have set up a unsuitable trust in the first place than to be in the position of trying to fix problems with it later on.’
However, both Dowley and Kubiak note that trusts, when well drafted and tailored to the client, can be highly effective from both a tax and estate planning perspective.
‘I think trusts are still incredibly useful as lifetime planning tools,’ says Kubiak. ‘But as with anything, you should get a professional to do it properly. There are law firms, probate companies and will writers who are excellent at writing wills and trusts. Sadly, there are also those who don’t do it well and are doing it for a quick buck.’
A key green flag is where the trust provider or law firm advising on the trust has a good level of expertise. A good way to check this is if the relevant person or company has the necessary regulations, for example a law firm should be regulated by the Solicitors Regulation Authority (SRA).
‘If I were looking to set up a trust, I would want to establish a good relationship with my professional adviser and to feel comfortable that my specific needs and circumstances were being addressed,’ she says. ‘Having proper professional advice and a bespoke structure, rather than an off-the-peg offering, is really important.’
