Protective Property Trust Wills

Protecting your Property with a Will Trust

Protective Property Trusts can be a useful trust that you can include in your Wills. They are primarily for couples and start from the basis that on first death your share of any property you own is passed into a trust rather than straight to the person/s inheriting it. The Trust is set up to accept the share of the property and at the same time a Lifetime interest is created for the remaining owner of the other share of the property (such as their spouse or partner). This lifetime interest allows the remaining owner to:

Sell the property if they wish to, in conjunction with the trust
Buy another property with the proceeds of the sale of the original property. If downsizing, the surplus cash can be split with the remaining owner getting a share of any surplus.

The powers of a Property Trust Will allow the surviving spouse/partner to borrow any money in the Trust with or without interest as deemed by the trustees. The property cannot be sold without the permission of the survivor who has become the Lifetime Tenant. The Lifetime Tenant cannot be evicted from the house for the rest of their Lives. The ultimate beneficiaries of the Trust would receive the full share after second death.

Protective Property Trust Cost

The cost of setting up a trust is £250 for a single Protective Property Trust Will and £390 for two Mirror Protective Property Trust Wills (for a Couple), inclusive of taxes.

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Protective Property Trust Wills and Care Home Fees

Putting a share of the house in trust to avoid care home fees for some of the assets in this way through a Will is a long standing practice. If the home is in the joint names of a couple the option to protect assets covers the following situations:

Couples concerned about this situation can include a trust in their Wills which, on first death leaves their share of the home into a trust called a Property Trust. The provisions of the trust state that the surviving spouse can live in the home for the rest of their life (rent free!) and that they can sell the home and transfer the arrangements to a new property. The surviving spouse therefore has all of the benefits of ownership of the property in the trust without actually owning them – and they have total ownership of their own assets, thus they are in the same position as if they did own everything.

Creating these trusts has been determined as not breaching the deprivation rule since the person transferring assets is the person who has died – who obviously has no future need for care. The surviving spouse, who may have a future need care has not transferred any assets so has not broken the deprivation rule. Avoiding care home fees on this part of the assets can be a very attractive option.

Should the survivor then need care the following situation is created:
1) The value of the share of the home of the first spouse to die belongs to the trust and therefore cannot be assessed by the Local Authority.
2) The Local Authority has to assess the open market value of the share of the home of the surviving spouse needing care. If the home is not sold (perhaps it can be rented out) it is possible to argue that the value of their share of the home is negligible or even much less than 50% of the whole because it is only part of a property– since few people are going to buy half a house!

It should be pointed out that if both persons need care then this scheme will not protect any assets because the trust is created in their Wills and therefore requires one of them to die for it to come into effect.
This scheme can only be instigated by a couple while both of them are alive and have the mental capacity to make Wills. As soon as one of them has died, this scheme ceases to be an option, so act soon!

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