Property Trust

A person’s biggest asset is often their home. It’s important to think about whether or not there are measures you can take to ensure that as much of your home as is possible passes to those who you love. There are a couple of options to consider. One is a Lifetime Transfer and Declaration of Trust where you transfer the house to for example your children, with a declaration that you can live there for the rest of your days. By doing this, you can reduce the risk of your home being used to pay for care fees, but also, you may avoid the need for your children to obtain a Grant of Probate when you die.

If you or your partner require care in later life, then your property may be at risk of being used to fund these care fees. There are legal steps that you can take to minimize the risk. At Lancashire Law, we specialise in ensuring that you and your family are protected against such an eventuality.

The other option is a Wills Based Property Trust.

Couples who have made standard mirror Wills (or do not have Wills) could unintentionally be gifting their home to care home fees. You should act now to protect your children’s inheritance.

A Will based Protective Property Trust enables you to safeguard at least part of your property. The Trust is activated when the Will comes into force, and not whilst you are still alive.

Why do I need one?

Should you or your partner require care in later life, your assets will be means-tested by the Local Authority to help pay for these services.

The Local Authority will seek to use the assets of a person until they are reduced to a lower limit. At this point, the Local Authority will contribute towards the person’s care costs. A contribution may still be requested, particularly if the person wishes to reside in a particular care home, but this would be a “top-up” payment.

What is the benefit of adding a Property Trust into my Will?

If you are not protected by a Property Trust Will, for example because you have made mirror Wills leaving your entire estate to your spouse/partner and vice versa, or you have not made any Will whatsoever, then when either of you pass away, the full value of the house would be used in any means test calculation that is performed for the remaining partner. This reduces the potential inheritance for your surviving children and beneficiaries.

How does it work?

If you own your house jointly then the good news is that there are some legal steps you can take now to protect at least some of your hard-earned assets. Forget the myths you may have heard. This is different to the “seven-year rule” on inheritance tax.

It also means you remain in control. Crucially, the house remains in your name during your lifetime, to do with as you wish – this is just sensible planning. However, you must act now whilst you are both alive and well.

The Trust

The Trust itself appoints a life tenant, usually the spouse or partner, who has a right of residence in the property for the remainder of their life. The Trustees have extremely limited rights in terms of the life tenant. Furthermore, if in later life, the surviving spouse/life tenant wants to sell the property, perhaps to buy another one and maybe downsize and release some equity, they can do so.

What other benefits are there of a Protective Property trust?

In addition to potential savings on care fees, there are additional potential benefits such as:

Surviving Spouse remarriage

without a Protective Property Trust and where a home is jointly owned without a property trust, the property automatically passes to the surviving joint owner. This creates a potential problem if the surviving owner, then goes on to remarry, leaving their estate to their future spouse.

Protecting your Children’s Inheritance

without a Protective Property Trust, and here the house passes to a surviving spouse who has children from a previous or subsequent relationship, they may choose to leave the assets that they have inherited from you to their children and dis-inherit yours. A Protective Property Trust ensures that each child is guaranteed their planned inheritance or distribution of assets, ensuring that your part of the property goes to your children. Assets are released upon the second death, guaranteeing that each child or beneficiary receives the inheritance planned.

Family arguments

without a Protective Property Trust, once the house is passed to the surviving spouse/partner, they are free to leave what they have inherited from you to whoever they choose. This means that if they disagree with any of your wishes, they can choose to dis-inherit people who you would have left your share of the property upon trust for. This may mean that some of your chosen beneficiaries may be dis-inherited with little or no say otherwise.

A Protective Property Trust protects against this and involves changing the ownership of your property so that you each hold in defined shares on trust which can then be left on trust to your chosen beneficiaries in your Will.