PROPERTY PROTECTION TRUST
Guarantee your legacy
Why should I protect my property?
Generally, couples want the family home to pass to their children. They often leave their assets to each other initially, in the hope that everything will pass to their children in due course
Unfortunately, things are not always this straightforward. For example, if your partner was to start a new relationship or re-marry after your death, the property could pass “sideways” to their new partner or spouse. Also, if the survivor has to go into care in their later years, the property could be sold to pay for their care fees.
A Property Protection Trust is a simple solution, and comes into force after the death of the first partner. When the first partner passes away, they do not leave their share to the survivor. They instead place their share into a protective property trust, with the survivor and the children named as beneficiaries. When the survivor later passes away, the share that has been protected under the trust will pass to the children; even where the survivor has re-married, gone into care, gone bankrupt or changed their Will.
What are the benefits?
In 2019, the average cost of a residential care home was £33,852 a year in the UK. This figure rose to over £47,320 a year when nursing care was included*.
Currently, anyone with assets or income over £23,250 will not receive a contribution towards their care costs. This often means that assets such as the family home are used to fund care. Trusts can help to protect assets for your loved ones.
(*Laing & Buisson Care of Older People Report 30th Edition 2019)
This type of trust structure is commonly used to control assets after death. The trust can provide flexibility, and certainty as to who the property will ultimately pass to in the future.
Trusts can safeguard assets in the event of bankruptcy proceedings being taken. In the current economic climate where many people are struggling with debt and the potential for bankruptcy threatens a greater proportion of society, protective trusts may be a very useful vehicle to protect the family home in particular.
So often assets are left to a partner or spouse through a simple ‘Mirrored Will’. The hope is that the assets are later passed down to children, however this arrangement can often be problematic, particularly where the surviving partner meets a new partner or even re-marries. Also, it is not uncommon for the children to lose out because the surviving partner goes into a care home; changes their Will or goes bankrupt. Property Protection Trusts are a really effective way to avoid this, and help guarantee your children’s inheritance.
So many factors affect whether or not the family home is passed down to children. For couples who want to guarantee who ultimately benefits from their home, a Property Protection Trust is an essential tool in the estate planning toolkit. As well as children’s inheritance the arrangement also ensure the family home is not passed on until both property owners have passed away.
Frequently Asked Questions
By having a Property Protection Trust (PPT) you are ensuring that your home, which is your most valuable asset, passes to your chosen beneficiaries regardless of what the future holds. If this is your goal, a PPT could help.
By making a Will, you are ensuring that your family will be taken care of and making the administration process much simpler.
Some people consider giving their property to someone else, such as a child, so that the asset won’t be counted for a care fees assessment. However, this may be viewed as a deliberate deprivation of assets, and you would then have to pay the same level of care fees as if you still owned the property.
Also, if your child’s circumstances were to change during their lifetime, you run the risk of losing the property and becoming homeless. For example, if your child went through bankruptcy, a divorce or they passed away, you may no longer be able to live in the property as the asset would be in their name and could be taken.
As a result, we would never recommend transferring a property into the names of children, or a third party without meticulous planning and advice.
Things are also more time-consuming and complex when a Will is not in place. This can cause additional stress for your family, at what is already a very difficult time.
Under the Wills Act 1837, in order for a Will to be legally binding it must be:
– made by a person who is 18 years of age or older, and who has their mental capacity;
– in writing; signed by the person making the Will and witnessed by two independent people;
– made of the person’s own volition, without pressure or coercion.
A witness cannot be a beneficiary of the Will, nor married to someone who will benefit. We normally advise that clients use close friends or neighbours as witnesses.
The witnesses are there to confirm that the Will was signed by the testator (the person making the Will), and that they knew what they were doing i.e. they were not under any undue influence or pressure to do so.
“Mirrored” Wills are commonly made by unmarried or married couples. Each person has their own document, but the wishes contained within them will be pretty much identical. For example, a “mirrored” Will may say that a couple want to leave everything to each other first, but then when both of them have passed away, the estate should pass to their children.
This is a term used to describe what assets of yours are left after any gifts, debts, tax funeral costs and other testamentary expenses have been paid.
The remainder of your assets are then distributed to your beneficiaries. This could include: your bank accounts, property and personal possessions.
Your residuary estate does not include things such as jointly owned property or bank accounts. It would also not include pensions or life insurance policies that have been written into trust – you would normally have nominated someone to receive these when you set them up.
You have to be at least 18 years of age to receive any inheritance that you may have been left. Sometimes clients feel that 18 years of age is still too young, and will instead opt for 21 or 25. Where a person is under the age of 18 (or whatever age you have specified), their inheritance would be looked after for them by trustees. The trustees would have the discretion to distribute money to them as and when they see fit. Once the child has attained the age of 18 or older, they will then become responsible for their inheritance and make all the decisions for themselves.
An Executor is someone who deals with the administration of your estate. You will appoint these people in your Will, and they are most likely to be close relatives or friends. For more complicated estates, it is not uncommon for someone to appoint a professional to act as their Executor.
An Executor is responsible for the following:
– Finding your Will;
Locating and valuing your assets;
Paying off any debts that there may be at that time;
Distributing the remainder of your assets (your residuary estate) to your beneficiaries.
A trustee is someone who looks after your property until a given time in the future. For example, where money has been left to a child, and they are unable to inherit until they attain a certain age.
Trustees must act with honesty, and integrity. Their responsibilities include: taking control of trust property, to safeguard such property and to act in the best interests of the beneficiaries.
A guardian is someone that you appoint to look after your child/children if something happens to you whilst they are under the age of 18.
If you pass away leaving young children, and you have not appointed a guardian, it will then become the role of the courts to find someone suitable to care for them. This could mean that someone other than who you would like is appointed to look after them.
No, but it is a good way of letting your executors what kind of funeral you would like. We would recommend that you discuss your preferences with your family too.