TIPS ON PROPERTY PROTECTION TRUST WILLS | March 2023  (2023)

An increasing number of people are starting to consider the possibility of a need for care in the future, and the financial impact care home fees may have on them. As part of that thinking, they are also looking at putting property in trust.

Topics that you will find covered on this page

Products like a property protective trust enable you to save a share of the property to pass on to loved ones. They are also known as ‘Property Trust Wills’ or Home Protection Trusts.

In this article we’ll cover:

– What are Property Protective Trusts?

– Who are these trusts best suited to?

– How do protective home trusts work?

– How much do trusts cost to set up?

– How to set up property trusts

– The disadvantages of these trusts

What is a Property Protection Trust Will?

These are a type of legal structure that can be included as part of your will. It is important to remember that ‘property protection trusts’ is a marketing term, so different solicitors use the term differently. If you are considering setting one up, you should get more information from the solicitors about what their trusts do.

Why would I want a Property Protection Trust Will?

A lot of people have their money tied up in their house. Setting up this type of arrangement in your will is designed to protect your family home from being included in assessments that are carried out to determine how much you should contribute to long-term care fees.

However, it can not be used solely for the aim of avoiding care home fees.

How does a Property Protection Trust Will work?

A Trust covers a share of a jointly-owned house to ensure that the surviving spouse or partner can continue to benefit from their deceased partner’s share in their home even when they are gone.

Should they have to go into long-term care facilities, their share of the property may be protected – and can be passed on to family members upon their death. It is also a useful tool for anyone looking at their estate planning and in particular ways to avoid paying inheritance tax.

A short video on how a Property Protect Trust Will works

Who is a Protection Trust suited to?

This type of will is best suited to couples that are married or in a civil partnership who are concerned about the possibility of a long-term care requirement in the future.

They are well suited to you if:

• You would like to protect your estate and home against the cost of possible future care fees
• You want to ensure that your children benefit from the value of your share of the property upon your death
• You want to ensure your surviving spouse can remain in your property, but you want to safeguard your children from the financial consequences of them remarrying
• You’d like to ensure that your surviving spouse or partner can continue to live in and benefit from your share of the value of the property upon your death

What does it involve and how does it work?

Normally when you set out your wishes and make a will, your estate and the value of your assets will be passed directly on to your beneficiaries, likely your surviving spouse, then after your death to your children. A care requirement and other circumstances can sometimes complicate or affect this process.

For this reason, trusts and products like them can hold assets on behalf of the beneficiaries to guard against the effect of IHT and care costs reducing the value of your estate.

An example of how a Property Trust Will works

The best way to explain how trusts works is to use an example.

Let’s say Mr and Mrs Bloggs jointly own their home. They want to ensure that their respective shares will be passed to their children when they pass away.

They also would like to know that if the surviving spouse requires care, at least half the home can be passed on to their family members.

If Mr Bloggs dies before his wife his half will go into trust – with the remainder left to his wife. She then has the common right to occupy the property or move house if she wishes.

If she requires long-term care at some point her husband’s share of the house remains in trust and cannot be taken into account during assessments conducted to determine the amount she will need pay towards her care.

In short, 50% of the home’s value cannot be taken and used to pay for care fees – and the property cannot be sold to pay for care fees.

These trusts covers every eventuality. Even if Mr and Mrs Blogg’s children divorce, predecease them or declare bankruptcy, they still retain occupancy and their share in the property is fully protected. Upon Mrs Bloggs’ death, the half share of the property is transferred to her children free from Capital Gains Tax.

What is a Protective Property Trust?

A protective property trust is also known as a type of legal structure that can be included as part of your will.

A lot of people have their money tied up in their house. A property protection will is designed to protect your home from being included in assessments that are carried out to determine how much you should contribute to long-term care fees.

However, it can not be used solely to avoid care home fees.

A Property Trust covers a share of a jointly-owned house to ensure that surviving spouses or partners can continue to benefit from their deceased partner’s share in their home even when they are gone.

Should they have to go into long-term care facilities, their share of the property may be protected – and can be passed on to family members upon their death. It is also a useful tool for anyone looking at theirestate planning and in particular,ways to avoid paying inheritance tax.

Who is a Property Protection Trust suited to?

This type of will is best suited to couples that are married or in a civil partnership who are concerned about the possibility of a long-term care requirement in the future.

They are well suited to you if:

– You would like to protect your estate and home against the cost of possible future care fees

– You want to ensure that your children receive at least half of the value of your house upon your death

– You’d like to ensure that your partner or spouse can continue to live in and benefit from your share of the property upon your death

How much does it cost to put your house in trust in the UK?

Creating a trust for your home can be a good method to safeguard your property, ensuring that it remains yours and is not subject to inheritance taxes. However, the cost of establishing a trust can vary significantly based on the type of trust, its purpose, and the amount of work needed.

The most basic fees for establishing a trust typically vary between £500 and £1,000 for seeking legal counsel and creating the relevant documentation.

Trustees may also demand payment for their services, which could incur additional expenses. However, this is typically accomplished on an individual basis.

Depending on various factors, such as if the trustees require assistance administering the trust or if it needs to be amended in the future, trusts that are more complicated may incur substantial legal expenditures.

Consequently, the total cost of establishing a trust might vary substantially based on its complexity and accompanying costs.

It is crucial to shop around for legal assistance and locate a lawyer that specialises in trusts to maximise your financial returns.

Ensure that they are certified and knowledgeable, since this will enable them to provide you with great, individualised advice at the lowest possible cost.

You should also consider whether developing a long-term relationship with the same advisor could be advantageous in the future, as having someone knowledgeable about your personal circumstances can be essential when dealing with complex issues such as trust administration.

This could even result in long-term cost savings, as these experts will be able to provide advice and support faster than new advisors.

Lastly, it is recommended to put the trust document in writing so that all parties know their responsibilities and that any associated fees are spelt out.

This will ensure that you and your trustees and any other parties have no future disputes.

Creating a trust for your home can incur large up-front expenses.

However, long-term savings could compensate for these expenditures if you search for legal counsel and locate an expert in trusts. With careful planning and a well-informed strategy, you may ensure that your home remains yours indefinitely.

Who controls the Trust?

The trustees administer the trust in accordance with the terms you have established. In addition, they are accountable for acting in your best interests and ensuring that all beneficiaries receive their entitlements in accordance with the trust deed.

Establishing a property protection trust might be an excellent approach to safeguard your home and family, but there are negatives to consider before making a final decision.

It is essential to research and find an experienced lawyer who can help you navigate the legal complexities of establishing a trust.

Lastly, if you determine that a trust is a correct choice for you, ensure that all associated expenditures are agreed upon in advance to avoid any unforeseen expenses.

How can I arrange a Property Protection Trust Will?

Together a couple makes a will leaving their share of their property within a trust. The trust is set up as part of the will. You will then both become trustees. This type of will can be set up online via the trusted provider, or in person.

It is a good idea to speak to a solicitor and/or specialist later life financial advisor when setting up this kind of trust.

They can be complex to arrange – especially if your situation is complicated.

This will naturally affect the cost, but the additional amount required for professional assistance is worth paying if you can afford it.

We are able to help you with this and you can find a phone number to call below or you can book an appointment with a Trust specialist who will help you set it up.

Are there any alternatives to a Property Protection Trust?

There aren’t any directly comparable products on the market – but there are different types of private property trust you could consider depending on your circumstances.

For example, if you have a significant amount of investments and assets, including property, a Flexible Life Interest Trust Will may be more appropriate for you. Alternatively, you could also look at using a Family Protection Trust.

A Discretionary Trust Will is a specialist product designed to protect property assets and other investments for vulnerable or mentally incapacitated individuals. You can find further details of other types of products available to help you protect your assets in the future here on the UK Care Guide website.

Another type of trust to look at is a life interest trust. This allows you to allocate a beneficiary who then has the legal right to receive income from or use a property named in the trust.

If you’d like further advice on trusts, charities such as Age UK and Citizen’s Advice Bureau can offer some limited guidance, but you would always be advised to speak to a Trust specialist.

The disadvantages of a property protection trust

Here is a list of disadvantages with a property protection trust:

– They can be expensive to set up and maintain a trust, as you need to pay legal fees and other costs.

– If a trust is not set up and administered correctly, it could lead to problems with the inheritance tax.

– Trusts can be very complex documents that require expert legal input and advice to ensure everything is appropriately set up.

– They may not be suitable for all types of property or families.

– The process usually takes time and effort to achieve the desired results.

– You will lose some control over the assets placed into the trust, as trustees manage them according to your wishes.

What other types of trusts can you use?

There a range of different trusts that you can use, and they are all worth exploring so that you can identify which one is likely to be the best one for your circumstances. These include:

Family Protection Trust

A family protection trust a legal option where you have full access to the assets in the trust while you are alive, but you get to choose who will inherit from the trust fund.

You can read more about these below.

Home Protection Trust

A home protection trust is a type of trust that protects your rights to reside in your family home. Having a trust makes sure that the home passes on to your beneficiaries, which are often your children.

You can read more about these below.

Inheritance Tax Planning Trust

An inheritance tax planning trust to help you manage what will happen to your estate after you pass away.

Not only can a trust help reduce the inheritance tax you and your beneficiaries will pay, but they are also a useful tool for safeguarding your assets and give you flexibility in how you manage your finances. However, it is worth getting advice on setting up a trust.

Asset Protection Trust

These are a tool for managing your estate to make sure your assets go where you want them to after you die.

An asset protection trust is set up during your lifetime, and assets in the trust are distributed quickly to the beneficiaries once you pass away.

You can read more about these below.