Pass on property and avoid the impact of later life costs

What is a Property Protection Trust?

A Property Protection Trust is a trust which protects a property from the impact of later life financial commitments, like care home fees, and enables you to continue living in your home while being able to pass on the value of it to beneficiaries, such as children.

There are lots of examples of Property Protection Trusts. A Property Protection Trust will be enacted if one person wishes for a property to eventually transfer to their children from a previous marriage whilst also ensuring that they can continue to live in it with a new spouse for the duration of their lifetime.

How does a Property Protection Trust work

Who is a Property Protection Trust suitable for?

A Property Protection Trust is suitable for couples who are considering the possibility of their spouse remarrying upon their death and are concerned that the property may pass to members outside of the family as a result.

It is also suitable for married couples or civil partners who are concerned about the prospect of either of them having to go into long-term care in the future. Properties are usually subject to local authority means testing for the purpose of calculating care fees.

How does a Property Protection Trust work?

A couple must own a property jointly as tenants in common. Both parties must make a Will leaving their share of the property in the Property Protection Trust set up in the Will. When the first person dies, their share of the property passes into the trust.

The surviving partner has a right to occupy the property during their lifetime and cannot be evicted by the trustees.

In terms of care fees, because the surviving spouse doesn’t actually inherit the property but simply retains an interest in it, the property cannot be counted as part of their estate when it comes to calculating care fees.

Upon the death of the second partner, the property passes to the beneficiaries who do inherit it and it forms part of their estate.

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At Just Wills & Legal Services we offer a range of options to ensure you can make an informed choice about your own situation. Whether online or in the comfort of your own home our professional consultants can help. To speak to one of our team contact us today.

Who controls the Property Protection Trust?

The Trust is controlled by the Trustees. Most of the time the surviving partner will be a Trustee, along with at least one other person. The Trustees do not have to be the same people as those appointed as executors under the Will, although often this is the case. Depending on your individual circumstances, you could also appoint a professional Trustee. Just Wills & Legal Services can act as a professional Trustee for you.

Why are Property Protection Trusts used?

Often, couples make Wills which leave their entire estate to the surviving spouse and, upon the death of the spouse, to their children. This essentially means that the survivor inherits the wealth of the deceased.

The problem with this is that the inherited wealth will be counted as part of the surviving spouse’s estate. If their wealth is over a certain level, they may be required to use the money to pay for care fees should they require it. This in turn can reduce the amount of money which will then be passed onto the beneficiaries.

By placing the property or part of the property in Trust, you can ensure that it will not be used to pay the care fees of the surviving spouse. As a result, the ultimate beneficiaries will inherit more.

Why are Property Protection Trusts used
Advantages of a Property Protection Trust

Advantages of a Property Protection Trust

The main advantage of a property Trust is that it can protect your property or a share of the property from the consequences of a change in the circumstances of the life tenant. This includes if they remarry, go into long-term care or find themselves in financial difficulty such as bankruptcy.

Disadvantages of a Property Protection Trust

The disadvantages of a Property Protection Trust can vary depending on your personal circumstances. Just Wills & Legal Services can discuss these with you and work out the best option for you.

Are there tax implications?

The share of the property held in the Property Protection Trust will not be subject to Capital Gains Tax. Because of the surviving partner’s right to occupy the property, the trustees can claim Principal Private Residence Relief.

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