What is a Property Protection Trust Will?
A property protection trust is a will designed to help protect your property from an assessment to long term care fees. The 50% share of the family home belonging to the first person to die, passes into the trust. This type of trust is also known as a life interest trust in favour of the survivor which means that they can benefit from the share of the property in the trust during his/her lifetime and on their death the trust fund passes to beneficiaries, usually children of the family.
They are important for spouses/partners who jointly own a home and who wish to:
If you have children from previous relationships and have remarried. You will need to Protect your own children’s inheritance.
You may want to take out a Property Protection Trust if you remarry, as your assets will automatically transfer to your new spouse bypassing your children. If you don’t your children may loose out on their inheritance. This is called sideways disinheritance. Your new spouse may have their own children and would wish to leave everything to them and bypassing your children altogether.
How does a Property Protection Trust work?
Essential to the working of Property Trust is the way in which you own your home. Most couples own their home as joint tenants. This means that when one of them dies, the home will automatically pass to the survivor. The solution would be to sever the Tenancy on the family home from Joint Tenancy to be held as Tenants in Common.
The beneficiaries have access to the trust funds but we ensure that these assets do not enter their estates and so are protected from attack by the following:
Marriage After Death – MAD
Placing half of the family home and other assets into a Trust on first death ensures that, should the surviving spouse/partner marry in the future, those assets cannot be taken into the marriage and removes the threat of your own children being disinherited. The survivor is still able to use the assets in the trust.
Placing the assets into Trust ensures that, if your children/beneficiaries are subject to divorce proceeding then what you intended them to receive is protected from any divorce settlements.
Holding the assets in the Trust ensures that they do not add onto the beneficiaries’ own estate and so cannot be assessed for their care costs.
Creditors or bankruptcy
Similarly, if any of your beneficiaries are subject to creditor claims/bankruptcy then their inheritance would not be exposed to these claims.
Further or Generational
IHT Holding the assets in the Trust ensures that they do not add to the beneficiaries’ estate and impact on their own Inheritance Tax.