Protective Property Trusts – What Are They?
Protective Property Trusts come in two general types. Firstly, the ones which are set up by your Wills. They are relatively inexpensive to set up, and have lots of uses, from protecting beneficiaries to giving some protection against care fees. That is the type this page is primarily about. If you already have protective property trust Wills, or you are willing to spend a bit more to improve the chances of your children, grandchildren etc, then you should read this page Property Trusts too. They are often called Lifetime Property Trusts, and are a more effective tool than property trust Wills in most circumstances as they take effect straight away.
If you already have this type of Will, see this page.
Protective Property Trust Wills are very very useful if you can’t yet afford full lifetime property trusts. But they do have their place, and they are cheaper to set up in the first place. And much better than standard Wills for most couples, and a more cost effective option for younger families.
Protective Property Trust enquiries 01323 741203.
Wills involve two parts:
- First, your home needs to be owned by both of you. The ownership is then changed so that you each own (typically) half each. The usual situation where you technically each own all of it.
- This allows each of you to write a special Last Will. The Will allows either partner the lifetime right to reside in the other half of the home (after the first death) as well as their own half. So when the first of you dies, their half of the property goes into special Protective Property Trusts written into the Will. The survivor can then carry on living in the whole property and move or downsize if they wish to.
The survivor can pretty much act is if they own the whole property, though half will be owned by the Property Trust. There are restrictions such as not being able to take out a mortgage, and the survivor not owning the capital representing the other half of the home.
The benefits of Protective Property Trusts include.
1) Disinheritance of children through remarriage of the survivor. The survivor can only leave their half of the property as they wish, and not the half owned by the person who died. That share will eventually go to their beneficiaries decided on by the first to die. The same applies to crooks trying to take advantage – they can only get half the property.
2) Substantial Protection against Care Fees. Unless you are unfortunate enough to BOTH need long term care at the same time. But even then there is the possibility of saving some of your capital. But this protection will not be available if the Property Trust Wills were put in place after there was a reasonable possibility of long term care being needed.
3) The Protective Property Trust Wills can give some protection against other creditors too, as long as they are unexpected (at the time the Wills were set up).
Protect your children’s inheritance.
Asset Protection Trusts: The Protective Property Trust
The Protective Property Trust (also known as a Life Interest Trust) – a may be very useful addition to you Last Will – as long as you don’t delay:
You may wish to include a Protective Property Trust in your Will if:
1) Your family contains children from previous relationships and you want to ensure fairness for them without disadvantaging your spouse or partner. Or you may think it likely that your spouse will remarry after your death, and wish to protect the interests of your children against any future relationship, without harming your spouses’ interests.
2) You and your spouse or partner are concerned that you will be one of around 70,000 people who lose their inheritance to the Local Council through Community Care Tax – the most vicious tax of all – which can wipe out all but the last £14,500 of your estate. And don’t think the new rules protect the last £72,000 – they do not!
3) You do not wish to leave your share of your property to your Partner but do wish to give them the right to live in the property for the rest of their lives, before the property passes to your children. (You may well provoke a claim under the Inheritance Act if this aspect is not dealt with thoughtfully.)
4) If you are worried that you may need nursing home care in the future. Your local authority may have the right to force the sale your home (or put a charge on it) and use the proceeds to meet the costs of your care. You cannot transfer your property to relatives to avoid paying nursing home fees, without falling foul of the law. But you can include a Protective Property Trust in your Will, containing instructions that upon the death of you or your spouse, that half share of the property is put in trust for your children (or other beneficiaries), instead of passing direct to the surviving spouse.
In this way, the half share of the property that has been put in trust is protected and the surviving spouse may continue to live in the property. That half share is sheltered from your local Councils Community Care Tax, levied on those needing long term care who have assets over £14,500. On the death of the surviving spouse or partner, the half share of the property owned by the trust can be given to the children.
How your property is owned.
Most homes are held as Joint Tenants:
Joint tenancy – is where the parties own a property together and upon the death of one person the property automatically passes to the survivor whatever the will says.
Tenancy in common – this is where each person owns part of the property in their own right and can leave their share to whoever they like. This allows more flexible planning for Asset Protection (such as against Community Care Tax) and Inheritance Tax.
Bearing in mind that Protective Property Trusts could save half the value of your joint estates, the cost is almost trivial – about the cost of two days care fees!
BUT DON’T DELAY – a Protective Property Trust is less likely to be effective if it is delayed – once you have been diagnosed with an illness which may lead to a need for long term care, the Protective Property Trust is less likely to be effective for that partner – but still worth a try.
Call the Legacy Trusts division of The Probate Department Ltd solicitors about protective property trusts on 0800 298 5208. Or pop you details in the box below (we promise not to give them to anyone else)