A Deep Dive Into Property Protection Will Trusts

Introduction

A Property Protection Trust (PPT) is a Will Trust that comes into being on first death of a married couple or partnership. The PPT allows the person creating the Will to give, on their death, a lifetime interest in their share of the main residence to a beneficiary of their choice (usually the spouse or partner), who is then known as the life tenant. The person creating the Will also chooses the ultimate beneficiaries of their share, known in legal terms as the remaindermen.

The life tenant (the surviving spouse or partner) never owns the share of the property absolutely, instead they have the right to lifetime enjoyment of this share of the property and / or any income that may arise from it.

When the life tenant (the surviving spouse or partner) dies, the share of the property passes absolutely to the beneficiaries, who are most commonly the person making the Will children.

When Is A PPT Appropriate?

The main reasons for considering a PPT are usually concerns around disinheritance and / or the worry of the potential future cost of long-term care fees.

Disinheritance:

If a spouse or partner dies and leaves their share of the home absolutely to the survivor, it is common for the children of both or either party to become disinherited.

This happens when the surviving partner remarries and either neglects to create a new Will or chooses to benefit their new family. This is a particular concern for blended families.

Care Fee Planning:

Once a share of a property has passed to the surviving spouse or partner, there is nothing to stop the entire property value from being included in a care fee assessment should the survivor require long term care in the future.

With a PPT, the share of the first to die is instead ring-fenced in trust. If the survivor then needs care, the deceased share of the property would not be assessed.

Key Features of a PPT

As mentioned above, the PPT provides a life interest in the main residence for the life tenant (usually the surviving spouse or partner). When the life tenant then passes away, the property passes to the designated beneficiaries (usually the children of the person creating the Will).

The PPT is only for one property. It provides powers to the life tenant to sell and buy this property within the trust on the same terms. Therefore, downsizing is available and indeed common within the PPT with any surplus funds from the sale available for investing to create an income for the life tenant.

Property Ownership

The property must be owned as ‘Tenants in Common’ whereby each owner owns a discrete share of the property (usually 50-50). This allows their share to be passed into trust (and not transferred through survivorship to the surviving spouse or partner as is the case with jointly held property). It is fairly straightforward to change the ownership of your property from Joint Ownership to Tenants in Common through some forms that need to be signed by the existing owners and registered with the Land Registry.

It is possible for one owner to unilaterally switch from Joint Ownership to Tenants in Common – this is an important route if the owner does not have capacity to act, for instance if they are in a care home.

Probate

Where a Will is created that contains provision for a PPT then on 1st death 50% of the property goes into the PPT and 50% forms part of the deceased estate. There is some legal work required at this stage to transfer ownership of the deceased share of the property into the names of the trustees of the PPT.

As discussed earlier, the life tenant then has the right to live in the property for the rest of their life. Upon the death of the life tenant, the trust property will pass to the beneficiaries.

What Next?

Are you looking to create or review your Will? Do you own property and or investments and want to ensure your wishes are protected on your death? Are you concerned about care fee planning?

Call 0117 3636 212 or email us at office@haroldstephens.co.uk to book an initial complimentary meeting with one of our SOLLA Accredited independent advisers.