So, what’s the truth about ‘Property Protection Trusts’?

People have often heard about these trusts but, as in all things online, confusion often reigns. Everyone’s a lawyer, friends of friends know a guy that thinks they’re great, but his sister says she wouldn’t go near one.

How do you know who’s right?

Our job here is to cut through all of the opinion, all of the ‘he-said, she-said’ and present the facts clearly, so that you can take an informed decision about whether you should have more than a Will, and have a Property Protection Trust.

‘I’ll stick with a Will, I know what it is, it’s simple and I understand it’

This could absolutely be the right move for you. Here, people (usually husband and wife) leave everything they own to each other depending on who dies first, and, when they’re both gone, to the children. This is usually called ‘Mirror Wills’.

What’s the problem with that, it sounds ideal?

It may be ideal, but it really depends what you want to achieve. A Will does exactly what it says above.

What else could I achieve?

Saving your property from being used to pay for care fees at a later date. 

Let’s use an example. Paul and Wendy are both 70. Their home is worth £250,000. Paul dies and Wendy inherits everything he owned because they had done Mirror Wills.

Wendy later required full time residential social care after a series of falls at home. Everything over £14,250 (the amount at which you do not have to pay your own fees) is taken in to consideration and, when she dies, Wendy leaves the £14,250 to her son.

You may not worry about this scenario. In fact, some people don’t. For others, they want to protect as much of their home as they can so that their children, grandchildren, or even charities can inherit it.

How does a Property Protection Trust help?

It’s really straightforward. Rather than leaving Mirror Wills, so that you leave everything to each other, you leave your half of your home to a Trust when you die. 

Carrying on from the example of Paul and Wendy above, when Wendy needs full time residential social care, Wendy only has £125,000 (half of the house) because Paul left his half of the house to a Trust. 

Wendy only has to pay until she has £14,250 left, so she spends £110,750 on her residential care. 

When she dies, that leaves an inheritance for her son of the amount she leaves, £14,250, plus Paul’s half of the house, £125,000 – a total inheritance of £139,250 for their son. 

That’s an extra £125,000 to their son. 

‘I’ve been told that you can’t do that. Anything that tries to avoid care fees is illegal’ 

It is true that there are rules that can potentially stop you from getting rid of the things that you own so that you don’t have to pay care fees later in life. 

A Property Protection Trust does not break those rules, and here’s why: 

Those rules apply to things that you do in your lifetime. You aren’t getting rid of assets so that you don’t have to pay care fees, you’re making a gift on death to a Trust. To put it bluntly – if you die before needing care, you can’t possibly be avoiding care fees, because you’re dead. And, you can leave your property to whoever you decide. Leaving it to someone other than your husband or wife is perfectly lawful. 

With a Property Protection Trust, you’re leaving your property to a Trust, but that Trust gives your partner the right to live in your shared home for as long as they want or, they can still move, that’s fine. Regardless of moving, your half of the property is always preserved for whoever you ultimately want to receive it once you’ve both died – through the Trust. 

‘Are there any other benefits’? 

What if you die, and your partner re-marries? You might say ‘they never would!’, but it does happen. When you marry, or re-marry, any Will that you have done is automatically cancelled. If you do not realise this and then die before your new partner, they will inherit usually all of what you leave. 

In our example Paul dies first leaving Wendy. They have done Mirror Wills leaving everything to each other, then to their son. Paul dies leaving Wendy his share, expecting it all to go to their son eventually.

However, Wendy later marries Rodger, her Will leaving everything to her son with Paul is automatically cancelled and she does not realise. Wendy dies, Rodger inherits everything from Wendy (which includes everything that Paul left); and, Rodger’s son, Alan, ends up with everything. Everything that Paul and Wendy worked hard for goes to Alan, NOT their son. It cannot be that they wanted that to happen. 

If they had done a Property Protection Trust, when Paul died, what he left would have gone to the Trust. Even if Wendy remarried, whatever Paul left within the Trust would still go to his son with Wendy, regardless of whether Wendy re-married.

A Property Protection Trust does much more than a Will, and makes sure that YOU choose who gets what you leave them. Unfortunately, an increasing amount of people are requiring residential care nowadays. You may think it will never happen to you, but if it does, or you re-marry, you’ll be fully prepared, and your loved ones and beneficiaries provided for. 

We hope this article has been of use to you. If you’d like to find out any more information surrounding how you can get a Property Protection Trust in place, you can visit our dedicated page by clicking here.