Local authorities may take an "aggressive stance" against schemes designed to help individuals avoid long term care (LTC) fees, an expert has warned.
Michael Young, chairman of the Society of Trust and Estate Practitioners (STEP), said advisers who recommend or even allow their clients to use trusts to try and avoid paying for LTC could see fines similar to that paid by HSBC last month.
In December, HSBC was fined a record £10.5m for mis-selling bonds to the elderly to cover their care fees. In many cases the clients were not expected to live to see the bonds mature.
Currently, people applying for LTC support will have money in trust excluded from their assessment, provided avoiding LTC fees is not the main purpose of the trust.
Young said many local authorities turn a "blind eye" to the practice or are lenient in applying the so-called "intentions test" to trusts.
However, he warned the current economic climate could force local authorities to take a more "aggressive stance" on the test.
Young said a change in local authorities' attitudes to trust use could result in advisers receiving complaints from clients, even if they warned clients not to attempt to hide their savings.
"Disappointed clients might well want to try and blame someone, and, however clear the warnings given to them at the time, they may blame their advisers," said Young.
"Unless the warnings given by advisers about the dangers inherent in such schemes have been very clear indeed, there is every chance that irate clients will seek compensation."
Young referred to the HSBC fine as an example of how advisers could become victims of the uncertainty around LTC.
"If one of our major financial institutions can get it so expensively wrong in this area, every STEP member giving advice to the elderly about care home funding should also be looking very carefully at the procedures they have in place," he said.
In October, advice firm Universal Group was investigated by STEP after a BBC programme revealed the firm's owner, Steve Long, was setting up trusts for clients with the sole purpose of avoiding LTC costs.
Available to 80,000 employers
Covered call option strategy
Impact on markets
More than 20 partners on board
Founding director of Intrinsic