What Is a Protective Property Trust in a Will?

A Protective Property Trust Will is an essential legal tool that aims to safeguard property for your loved ones, especially in the context of long-term care fees. Here, our experts discuss Protective Property Trusts and whom they are designed to help.

For many couples, their family home isn't just the most valuable asset they own in terms of finances; it is a trove of memories. Ensuring it is protected and transitions properly to the next generation, especially in the context of long-term care or unforeseen circumstances, is vitally important.

A Protective Property Trust (PPT) is an excellent legal tool in estate planning that provides a solution to these concerns. Whether you are familiar with the term or are now hearing about it for the first time, this guide digs deeper into what this type of trust entails, why it is often essential, and the common questions you may have if you are considering setting up this type of trust.

If you have any questions we have not answered regarding Protective Property Trusts, our expert Wills, Trusts & Probate solicitors are happy to speak to you regarding your query and provide the legal services you need. You can contact us by completing the enquiry form below or by calling 0151 666 9090.

What is a Protective Property Trust in a will?

In a will, a Protective Property Trust is a specific type of legal arrangement designed to protect a person's share of a property from potential future assessment for long-term care fees. It is usually included as part of a will as a type of legal structure. This combination is often referred to as a property protection trust will.

When one partner of a couple passes away, instead of their share of the property transferring directly to the surviving partner, it goes into a trust. This trust is typically known as a “life interest trust” in favour of the surviving partner.

This arrangement ensures that the surviving partner can continue to live in and benefit from the property throughout their lifetime. They retain the right to live in the home, even though they technically do not own 100% of the property - instead, it is considered among the trust assets and co-owned by the trust.

The primary motivation behind this trust is to protect at least half of the property's value (i.e., the deceased partner's share) from being considered as a financial asset if the surviving partner later requires long-term care. This can help beneficiaries of the estate to avoid paying care fees from the value of the property.

By doing this, the intention is to preserve as much of the property's value as possible for future beneficiaries, usually the couple's children or other family members.

Who should consider using a Protective Property Trust?

A Protective Property Trust will may not be suitable for everyone, but it serves as a useful legal tool for certain individuals and couples with specific estate planning goals and concerns.

This type of will is ideal for couples who own their home jointly, and who also anticipate that either partner might require long-term care in the foreseeable future. It is designed to keep at least half of the home's worth intact for beneficiaries, even if the surviving partner undergoes a financial assessment for care fees.

This type of arrangement may be right for you if:

• You wish to protect your home and estate from the cost of future care home fees.
• You want to ensure that your children inherit your portion of the property after you die.
• You wish for your surviving partner to stay in the family home after your death.
• You aim to safeguard your children’s inheritance in the event of your partner remarrying.

This type of trust also has implications for Inheritance Tax liability that are important to consider, and it is vital to work with an expert solicitor when you are considering taking this step.

How does a Property Protection Trust will work?

When a person creates a Property Protection Trust will, they ensure that their share of the property is placed into a trust upon their death. This procedure often involves the following steps:

1. Creation of the Will: Both partners create wills that dictate that their respective shares of the property will be placed into a protective trust upon their passing.
2. Ownership Structure: Before or while setting up the will, the owners must ensure their property is jointly owned as "tenants in common." This type of ownership structure allows each partner to have a distinct share in the property, which can be left separately in their will.
3. Death of One Partner: Upon the death of the first partner, their share of the property goes into the trust. The survivor retains the right to live in the home for the rest of their life, benefitting from the share of the property that now resides within the trust after the first death.
4. Title Deeds Transition: After the death of one partner, the legal title for the property should be transferred to the joint names of the surviving partner and the trust's trustees. Often, the trustees are the same individuals named as executors in the will. The surviving partner can also serve as one of the trustees.
5. Control of the Trust: The trust is controlled by the trustees, who ensure that the terms of the trust are met. Despite this control, the surviving partner's right to occupy the property remains the same and is protected in the terms of the trust.
6. End of Trust: Once the surviving partner passes away, the property, or the proceeds from its sale (in the event that the property is sold during the lifetime of the surviving partner), are given to the predetermined beneficiaries, usually the children. This transfer happens without any Capital Gains Tax implications for the share held in the trust.

Can the surviving spouse be evicted from the property by the trustees?

No, the surviving spouse cannot be evicted by the trustees. A Property Protection Trust will specifically grants the surviving spouse a right of occupation. This means they have the legal right to continue living in the property for the remainder of their life.

In addition to this, the surviving spouse also has a right of occupation stemming from the half share of the home that they personally own. The structure of the trust is designed to protect and prioritise the interests and rights of the surviving spouse, ensuring they have a secure place to live after the passing of their partner.

What if the surviving partner wishes to sell the home?

A sale of the property by the surviving partner is allowed under the rules of the trust. The property can be sold, and a new property can be purchased with the proceeds. The money from the sale is typically divided in line with the ownership shares. The portion that belongs to the surviving partner is kept by them, while the portion that belonged to the deceased and was placed in the trust remains in the control of the trust.

When a cheaper property is bought with the proceeds, the remaining profit should be equally divided between the trust (representing the deceased partner's share) and the surviving partner. This ensures that the trust's assets are maintained, while the surviving spouse continues to benefit from their share.

It is essential, however, to always consult with the trustees before making any significant decisions regarding the property. This ensures that the terms of the trust are adhered to, and the interests of all beneficiaries are considered.