Property Trust Wills
Property Trust Wills are ideal for spouses/partners who jointly own a home and who wish to:
- Protect their children's inheritance from the effects of re-marriage following the death of one spouse/partner.
- Protect the inheritance of children from previous relationships.
- Protect up to one half of the value of the home from the effects of long term care fees.
How do they work?
Essential to the working of Property Trust Wills is the way in which you own your property. Most couples own their home as joint tenants. This means that when one of them dies, the home will automatically pass to the survivor.
We would alter the ownership of the home from joint tenants, to tenants-in-common. This means that you will each own an identifiable share in the home.
This has the important advantage in that the deceased spouse/partner can leave their share of the home in trust for beneficiaries of their choice whilst granting the surviving spouse/partner a life interest in the home for the surviving spouse/partner's lifetime.
Should the surviving spouse require long term care, the local authorities could only take into account their share in the home, and not the whole.
Should your spouse/partner remarry after your death, your share in the home would be protected for beneficiaries of your choice and would not pass to your spouse/partner's new wife or husband.
Can the surviving co-owner move, or will they be stuck in the same property?
You can move. The terms of the trust can be flexible. We always ensure that the person living in the property has the option to move to a new property if he or she wishes. Perhaps the home would be too large and there would be a wish to move to a smaller property.
Can the beneficiaries force me out of the property?
No. The terms of the trust dictate that they will only inherit when both of you die.
Do Property Trust Wills help with Inheritance Tax?
No. Since your spouse/partner has right to use your half of the house, this is regarded as though he/she owns the property for the purposes of calculating inheritance tax. The sole benefits of the Property Trust Wills are to protect against possible future care cost fees or to protect your share in the property for beneficiaries of your choice.
Can the Government change the rules to make this invalid?
No. In your Will you are entitled to do what you like with your half of the home. The Government may in the future change the rules relating to care costs, but this would of course then only apply to the survivor of you - the one most likely to need care.
Property Trust Wills are not a legal "loophole", but straightforward common sense. If your partner requires care after your death, why would you want to leave him or her your entire estate outright shortly before he or she is about to be means tested?
Why half - why can't I put the whole of the house in trust?
If one spouse/partner owns the property in their sole name then yes, you could put the house in trust for the children and allow the surviving spouse/partner to live in it for the rest of their lifetime. If the surviving spouse/partner requires care after your death then the whole of the property is safe.
But, if your spouse/partner dies first and you need care, the whole house is at risk since the trust is only activated by your death, by which time, care cost fees will have drained your estate. Protecting half of your home is better than losing it all.
We don't have any children - who would I leave my share to?
You can include anyone or any organisation in your trust. Maybe other relatives or chosen charities or perhaps a combination of both. The choice is yours.
Will this protect the home if we both require care?
No. The trust is activated on death and not at the time of signing. However, since it is usually only a survivor that needs care, you are at least protecting one half of the home.
Mr and Mrs Jones own number 1 Example Street as joint tenants, and they decided to prepare Property Trust Wills to protect their shares in the property from the effects of re-marriage.
Firstly, we would alter the ownership from joint tenants, to tenants-in-common.
We would then create a life interest in 1 Example Street for the surviving spouse, with the eventual net sale proceeds passing equally between their children. The surviving spouse would be given the right to move to another property if that is their wish, and any monies realised from the sale of the property would be invested by the trustees of the Will and the survivor would have the benefit of the income from those investments for the remainder of their lifetime.
Let us suppose that 1 Example Street is valued at around £200,000 and that Mr Jones passes away first. Mrs Jones then decides that she wishes to move to a smaller property valued at £100,000. Mrs Jones could sell 1 Example Street and use Mr Jones' "trust" of £100,000 to buy the new home. Mrs Jones could then do as she wishes with her £100,000.
Alternatively, Mrs Jones could own half of the new property and the Trustees would own the other half of the property. Mrs Jones could then do as she wishes with her remaining £50,000, and the Trustees could invest the remaining £50,000 from Mr Jones' "trust", in say a bond, and Mrs Jones would have the income from that bond during the remainder of her lifetime. On Mrs Jones' death, Mr Jones' half share in the property and the money in the bond would pass to his chosen beneficiaries. Mrs Jones' half share in the property would pass to her chosen beneficiaries.
If Mrs Jones re-married during her lifetime, Mr Jones' share in the home would have been protected for his beneficiaries.