Will Trust Series Three: Property Protection Trusts
One of our core Estate Planning offerings is the use of Will Trusts. Different types of trusts can be written into your Will to protect assets for the family, in case certain problems arise. However, to the average person on the street, there are potentially a bewildering number of different Will Trusts available, all with different names and uses. To make matters worse, different legal advice firms have different names for the same type of Will Trust!
Although this article is an attempt to de-mystify Will Trusts a little, don’t panic! My main takeaway advice with regard to Will Trusts (and Estate Planning in general for that matter) is to get in touch for an initial meeting with one of our later life specialist advisers. At this initial meeting be prepared to talk about your current situation, what you are looking to achieve and what you are worried about. Once our advisers have got a good grasp of your situation they will be able to start discussing some recommendations with you, which may or may not involve a specific Will Trust!
Anyway, back to Will Trusts. Let’s talk about Property Protection Trusts (PPT). These types of trusts are basically a form of Life Interest Trust (LIT) incorporated into the Will. The PPT allows the person making the Will to give a lifetime interest in their share of the main residence to a beneficiary of their choice, who is then known as the ‘life tenant’. The person making the Will also chooses the ultimate beneficiaries, known as the ‘remainderman’. The ‘life tenant’ never owns the property absolutely. Instead they have the right to lifetime enjoyment of the property and any income that arises from it.
When might you need a PPT?
The PPT is used to protect the main family home for people worried about disinheritance and also the cost of potential care fees.
1. Disinheritance
If one spouse dies and leaves their share of the home absolutely to the survivor it is possible for the children to become disinherited. This can happen when the surviving spouse remarries and either neglects to create a new Will or chooses to benefit their new family. This is particularly a concern for ‘blended’ families where there are children from previous relationships.
With a PPT, the share of the property from the first to die become ring-fenced into the PPT. Leaving it protected for the eventual trust beneficiaries , who are likely to be the children.
2. Care Fee Planning
Once a person dies and their share of property pass to a spouse or partner , there is nothing to stop the whole property value be included in that person’s care fee financial assessment. With a PPT however, the property share of the first to die is ring-fenced into the PPT. The survivor can live in the property (and indeed enjoy any income generated) during their lifetime; however the underlying capital value of the property, should not be included in any care fee financial assessment.
Joined Up Estate Planning
Often when people hear the phrase ‘Estate Planning’, they often think of writing their Will, perhaps incorporating a Will Trust such as explained above. But in practice, Estate Planning often involves more than many people think. When families begin reviewing their estate plans more holistically, especially with our guidance as later life financial and legal specialists, they are often surprised to discover gaps and inconsistencies.
A well-considered estate plan usually brings together several areas of financial and legal planning. Wills, LPAs and Trusts form part of that picture, but so do questions about inheritance tax, long-term care considerations and investment management.
Alongside legal arrangements, financial planning considerations are often closely connected. Investment decisions, pension planning and inheritance tax allowances can all influence how efficiently assets might pass between generations both in lifetime and on death.
For some families, another important aspect of estate planning, particularly with regard to LPAs, is considering how financial resources might be used later in life, particularly if care or support becomes necessary. With this in mind, thoughts turn naturally to aligning investment management, Immediate Care Plans and inheritance tax strategies.
Many people find that different parts of their planning have been put in place at different times of their life. A Will may have been written many years ago, LPAs actioned at some point but long forgotten about, pensions and investments taken out whilst still working.
Individually, each decision may have been sensible at the time. But without reviewing them together, it is not always clear whether the overall plan still reflects current intentions and your life situation as it stands. It is critical that the financial and legal arrangements for your estate planning are perfectly aligned. If they are not, it can create unwanted upset down the line.
Estate Planning Events
To help people understand these issues more clearly, we will be running a series of free Estate Planning seminars locally this June and July. These sessions will explore key elements such as Wills, LPAs and Trusts and explain how they work alongside your financial planning arrangements like inheritance tax, investment management and care fee planning.
To find out more about the seminars or arrange a relaxed chat about your circumstances, call 0117 363 212 or email office@haroldstephens.co.uk.
50 High Street, Westbury on Trym, BS9 3DZ