Property Protection Trust Will.
Property Protection Trust Will. (It is also known as a life interest trust in favor of the survivor trust).
Most people assume that their assets will be inherited by their children or other beneficiaries when they’re gone. Sadly, this isn’t always the case, unless specific arrangements are put in place to protect your property from being seized to pay for care home fees.
It is a specially designed Will for couples concerned about the impact care home fees would have on their children’s inheritance, should one or both partners require long term care in a home.
A Property Protection Will Trust is the simplest and most economical way of protecting your property.
The half share of your family home owned by the first person to die, will then pass into the Trust. This means the survivor can benefit from the share of the house in the Trust during his/her lifetime and on their death the Trust fund passes to others, usually children.
Property Protection Trust Will. Is the simplest and most economic way of protecting your property.
Bear in mind one it is not a free standing Trust it is a Will Trust which means it only becomes active after death.
Types of ownership
The first point to understand is the ownership of your property, it is one of two types “Tenants in common” or “Joint tenancy” (tenancy in this context refers to ownership not renting)
“Tenants in common” both parties own all of the property when one dies the survivor owns all of the property.
By owning the property as “Joint tenants” both owns half the property when one party dies their half is then passed on to their beneficiary in the Will.
If Mr needs to go in to a care home Mr’s half of the house has a nominal value as Mrs is still living in the house.
When she dies her half is inherited by her children (or nominated beneficiaries).
The negative with this type of protection is that if Mr needed care and before he died Mrs needed care, then as both were not living at the property the council could make a charge against the property. As neither has died the trust has not come into effect. You need to look at your ages and heath if you are both of a similar age and health what is the possibility of both of you needing care at the same time.
The solution is to setup an Asset Protection Trust.
Why not Just give it to your children.
That might seem like a simple solution, however, the council could simply check the land registry and discover that you’re still living there and have only transferred ownership. This is classed as ‘deprivation of assets’ because you’re trying to claim you don’t have assets that can be used to pay for care home fees. In this instance, the council would still assess you as owning the property and you would be liable to pay any fees due. That could ultimately mean having to sell your home to pay them. There could also be tax issues for your children as capital gains tax is 40% (click on the logo for a factsheet about capital gains tax).
Who is a Property Protection Trust will suitable for?
It is a specially designed Will for couples concerned about the impact care home fees would have on their childrens inheritance should one of them require long term care in the future.
Frequently asked questions about Property Protection Will Trusts
Who controls the Trust?
The Trust is controlled by the trustees. The surviving partner will usually be a trustee and at least one other person, usually their children. Even if the survivor is not a trustee, their right of occupation is protected.
Could the surviving partner be evicted by the trustees?
No. Their right to occupation is protected. As they own half of the property in their name, it means that the property cannot be sold of a loan raised against it.
Are their inheritance tax implications?
A Property Protection Will Trust has no adverse inheritance tax implications.
What if the survivor needs to move into a care home?
The half share belonging to the survivor is classed as a capital asset and may be subject to assessment for care home fees. The half share held in Trust is a disregarded asset for the purposes of financial assessment by the Local Authority.
What if the survivor needs to move house?
There is no problem with selling the property and moving into a new home. If the new property costs less than the original, any profit would need to be shared equally between the trustee and the surviving partner.
Can I change my mind?
At any time up to the first death you can change your Will. The Trust doesn’t come into existence until after the first death.
To fully protect your assets, we recommend an Asset Protection Trust. This is a free standing Trust and is effective immediately. Unlike a Will based Trust, it doesn’t require one of the partners to be deceased before it gives protection.
Want more information and to discuss the right solution for you?
Give us a call on 01406 430 541 today or complete our contact form and we’ll get back to you.