Property Protection Trusts - Nene Legal

Property Protection Trusts

Protect Your Family, Estate & Loved Ones

Property Protection Trust

For many people their home is their main and most treasured asset that they are most keen to protect.

At Nene Legal we can help you understand the options available to you to protect your home and make sure it passes on to the next generation.

In today’s world second marriages are common so you may have stepchildren and children of your own you want to protect.

The Property Protection Trust (PPT) can make sure that your spouse is looked after, but ultimately your own children will benefit.

For many people their home is their main and most treasured asset that they are most keen to protect. At Nene Legal we can help you understand the options available to you to protect your home and make sure it passes on to the next generation.

In today’s world second marriages are common so you may have stepchildren and children of your own you want to protect. The Property Protection Trust (PPT) can make sure that your spouse is looked after, but ultimately your own children will benefit.

You may be concerned about what would happen to your property, or your share of it, if after your death your spouse remarried or formed a new relationship.

What if after your death your spouse needed to move into long term residential care, or became financially vulnerable? Both of these could lead to the loss of the property, either to a new spouse, bankruptcy or to fund care fees.

You could leave your share of your property directly to your children to avoid this but this creates issues of its own. If any of the children themselves divorce or become vulnerable, or if they wish to sell the property to take ‘their share’ this too could lead to problems for your surviving spouse.

Our consultant can create Mirror Wills for you and your spouse and write a PPT into them both.

This means it will be ready to protect the share of the property that belongs to whichever of you passes away first. This share of the property will be held by your Trustees, who you will appoint in your Will, and will be protected from all of the threats above. Your spouse can continue to live in the property.

The PPT can be tailored to you and we can advise you on the various options available, such as allowing them the freedom to sell the property and move to more suitable accommodation if necessary, or even ending the trust early if they do remarry.

The PPT protects your share of the property by making sure it doesn’t belong to your spouse. So, if anything happens to them such as needing care your share of the property is safely tucked away.

There is more to Will Writing than your last will and testament, and Nene Legal are more than just a will writing service, we’re Estate Planners. Before we can consider what planning is right for you, we need to understand just what you own and how you own it. Do you know how you hold your property and what this means for your estate plan? Our Consultants at Nene Legal can find out this crucial information for you as part of our estate planning service. This knowledge will help you take the next steps in your planning.

Joint tenants and Tenants in Common?

Most people who own a property with someone else own as ‘joint tenants’. In this context ‘tenants’ means ‘owner’ and has nothing to do with renting!

If you own as joint tenants this means that you and the other owner don’t have your own separate share of the property. You actually each own 100% of it. What this means practically is that if you die the property simply passes to the other owner automatically, regardless of anything you have written into your Will! This is known as ‘survivorship’.

If you own as ‘tenants in common’ survivorship does not apply and you each have your own share in the property. This means you are free to do whatever you wish with your share of the property, which leaves you free to plan for it in your Will. A lot of the planning we recommend at Nene Legal for protecting your property will begin with making sure you own as tenants in common.

Benefits of Tenants in Common

  • You each have your own share in the property
  • Shares can be unequal – this can be done to take account of one owner making a larger contribution to the purchase
  • Each owner has control over their own share and can gift it in their Will
  • Each owner can leave their share to a trust to protect it for their children
  • Avoids survivorship
  • If you divorce, the property wont pass to your former spouse automatically on your death
  • Can reduce inheritance tax (IHT) and care home fee liabilities

If you each own your own share of the property you can only be assessed on what you actually own. If you die, you’ll only pay IHT on your actual share of the property. If you need care, you can only be assessed on the share that you own.

Next Steps

The process of changing from joint tenants to tenants in common is relatively quick and unobtrusive. The process is known as Severance. At Nene Legal we can help you every step along the way, from initially enquiring with Land Registry to confirm how your property is held to completing all of the necessary paperwork for you and working with the Land Registry.

Going through a divorce? Other owner won’t agree to the Severance? Ask us how we can help you resolve this.

Our consultant can create Mirror Wills for you and your spouse and write a PPT into them both. This means it will be ready to protect the share of the property that belongs to whichever of you passes away first. This share of the property will be held by your Trustees, who you will appoint in your Will, and will be protected from all of the threats above.

Your spouse can continue to live in the property. The PPT can be tailored to you and we can advise you on the various options available, such as allowing them the freedom to sell the property and move to more suitable accommodation if necessary, or even ending the trust early if they do remarry.

The PPT protects your share of the property by making sure it doesn’t belong to your spouse. So, if anything happens to them such as needing care your share of the property is safely tucked away.

When the first person passes away their share of the property will pass to the PPT. A trust will have to be created at probate, and from that point onwards the trust will own that share of the property. The surviving spouse or partner will still continue to own their own share of the property. 

In day to day life nothing really changes for the survivor, or ‘life tenant’. They can continue to live in the property if they want to, they could even decide to rent it out. If they decided to do this they would be entitled to all of the rental income, so this can be a good option if they can no longer live in the property anymore.

The trust also allows for the survivor to sell the property. After all, as they age they may need to move somewhere more accessible or even closer to family. If they want to sell the property they will need to work with the Trustees to do this, but in reality this isn’t a problem. The trust makes it clear that the Trustees will agree to sell if that’s what the survivor wants – after all, part of their job is looking after their best interests!

Most PPTs will last for the entire life of the surviving spouse. Only ending and passing the property onto the children when they pass away. We can discuss other options with you though as the PPT can be made more flexible than this. Below are some commonly requested time periods for the PPT to last for:

  • A set number of years – Maybe you just want to give your partner a 5 year period to get their affairs in order before the property passes on to your children?
  • Until remarriage – We can draft the PPT so that it ends if your spouse ever remarries. At that point the property, or your share of it at least, would pass on to your children.
  • Until they stop using the property as their main home – If you want to make sure the property is only ever used as your partner’s main home we can end the trust if they move out. This is useful if you would prefer the home to pass on to your children sooner rather than later, for example if the survivor moved into residential care and no longer had a need for it.
  • Until the youngest child reaches 18 – This is useful for someone using a PPT to allow a guardian to move into the family home to care for the children, should both you and your spouse die. It causes minimal disruption to the children’s lives as they can continue to live in familiar surroundings, but still makes sure they inherit the property when they’re old enough.

What can happen without a Property Protection Trust?

Without a PPT your property might be vulnerable. Let’s take a look at two common scenarios:

Case Study 1

Mr and Mrs Smith own their property together. They each have children from previous marriages who they want to provide for.

They have Wills leaving everything to each other, and failing that to their own children.

Mr Smith dies first passing everything he owns to Mrs Smith.

When Mrs Smith dies all of her estate passes to her own children, leaving nothing for Mr Smith’s children.

This unfortunately leads to Mr Smith’s children challenging the Will and bringing a claim against Mrs Smith’s estate.

With a PPT this could have been avoided.

On Mr Smith’s death his half of the property would have passed to the PPT, but Mrs Smith could continue living in the home without any disruption to her usual routine.

When Mrs Smith died only her share of the property would have passed to her children.

Mr Smith’s share would pass to his own children as he intended.

Case Study 2

Mr and Mrs Brown own a property together.

They have three children who they want to inherit after they have both died.

Their Will leaves everything to each other and then to the children.

Mrs Brown dies and everything passes to Mr Brown.

Not long after this Mr Brown is diagnosed with dementia and moves into residential care.

He owns the whole property, so this is included when the Local Authority assess him to see if he needs to fund his own care.

The property is sold to fund his care.

When he passes away the children receive very little.

With a PPT Mrs Brown’s share of the property could have been protected.

The children would have received at least the value of her half of the property.

Case Study 3

Mr and Mrs Jones are a couple who own a property together. They write wills leaving everything to each other, and failing that to their children. Mr Jones dies unexpectedly, so the property passes to Mrs Jones. Mrs Jones meets someone new and remarries. She rewrites her will and decides to leave everything, including the house, to her new husband. She dies, everything passes to her new husband, and her children receive nothing.

With a PPT Mr Jones could have protected his share of the property and made sure that at least that passed to his children once Mrs Jones passed away. Even Mrs Jones could have benefitted from a PPT on her death. This would have ensured that her share of the property would then pass to her children eventually after her new husband’s death. The end result would have been that Mrs Jones, and then later hew new husband, would have been able to use and enjoy the property, but eventually it would have passed on to Mr and Mrs Jones’ children.

Case Study 4

Mr and Mrs Crowe own a property together. They write wills leaving everything to each other, or to their children when the second of them dies. Mrs Crowe dies and everything passes to Mr Crowe. Mr Crowe later remarries but he makes sure that his will still passes the property on to his children. A few years later Mr Crowe and his new wife divorce, and she ends up being awarded a large share property in the divorce settlement so it has to be sold. This leaves the children with less when Mr Crowe dies.

This situation couldn’t have been totally avoided, but the impact on the children’s inheritance could have been minimised with a PPT. If there had been a PPT Mrs Crowes half of the property would have been proteced. It would never have belonged to Mr Crowe so wouldn’t have been vulnerable when he divorced. Only his own half share could have been taken into account, so the children would have ended up inheriting more.

This has covered only the basics of what a PPT can do. To understand more about how the PPT can help you and its various inheritance tax benefits please get in touch with one of our Consultants.