I speak to families every week who have worked hard all their lives to own their home, only to realise too late that without the right planning, that home could be swallowed up by care costs, inheritance tax, or family disputes. It is one of the most uncomfortable conversations in estate planning, but also one of the most important.
Setting up a trust for property in the UK is not just a strategy for the wealthy. It is a practical legal arrangement that any homeowner should seriously consider. Between April 2024 and March 2025, HMRC recorded 121,000 new trust registrations, bringing the total number of active trusts in the UK to 835,000. Trusts are no longer a niche tool. They are becoming a mainstream part of responsible estate planning for ordinary families nationwide.
So, what is a property trust, how does it work, and why does it matter now? Let me walk you through it.
Contents
What Is a Property Trust?
A property trust is a legal arrangement where you transfer ownership or control of your property to trustees, who then manage it on behalf of named beneficiaries. The terms of the trust set out precisely how the property should be handled, who can benefit from the trust, and under what circumstances.
| Role | Who They Are | What They Do |
| Settlor | You (the property owner) | Creates and funds the trust |
| Trustees | Appointed individuals (often family) | Manage the trust according to its rules |
| Beneficiaries | Family members or loved ones | Stand to benefit from the trust |
Once property is transferred into the trust, it no longer forms part of your personal estate in the same way. This has significant implications for inheritance tax IHT, care costs, and succession. Unlike a Will that goes through probate and becomes part of the public record, a trust remains entirely private.
Why Does This Matter Right Now?
HMRC figures show that inheritance tax receipts hit a record £8.2 billion in the 2024/25 tax year, up from £7.5 billion the year before. The nil-rate band has been frozen at £325,000 since 2009, while the average London home now costs around £740,000. Ordinary families are being pulled into the IHT net simply because of rising property values.
Long-term care costs are equally alarming. Average UK care home fees in 2025 are £1,406 per week for residential care and £1,558 per week for nursing care. Without proper planning, your family home could be assessed as an asset and used to fund those costs in full. The case for estate planning has never been stronger.
What Is a Protected Property Trust?
A protected property trust (PPT) is a trust written into your Will that protects your share of the property when you die. It is among the most widely used property trusts in the UK and works particularly well for couples.
Step 1: Change ownership to tenants in common
Most couples own their home as joint tenants, meaning the property automatically passes to the surviving spouse upon the death of the other. To set up a protected property trust properly, you first need to become tenants in common, each owning a defined share, usually 50/50. A Deed of Severance must be drafted and registered at the Land Registry alongside your Wills.
Step 2: Write the trust into your Will
Each partner writes a professionally drafted Will leaving their share into the trust rather than outright to the survivor. The terms of the trust clearly name the trustees and beneficiaries.
Step 3: The trust activates on death
When the first partner dies, their share passes into the trust. The surviving partner continues to live in the property for life. If they later need care, only their own share is included in the local authority’s financial assessment.
Step 4: The property passes to beneficiaries
When the surviving partner passes away, the trust share passes to the named beneficiaries, typically the children, according to the trust’s terms.
How Does It Protect Against Care Costs?
If your capital exceeds £23,250 in England, you pay for your own care in full, and that assessment includes your property. Under a protected property trust, because the home is owned as tenants in common, the deceased partner’s share sits inside the trust. The local authority cannot count it when assessing the surviving partner’s care costs.
A practical example: John and Susan own a home worth £400,000 as tenants in common. John dies. His £200,000 share passes into the trust. Susan continues to live in the property. When Susan later needs care, the local authority assesses only her £200,000 share. The other £200,000, held in trust for their children, is protected.
One important caveat: local authorities can investigate deliberate asset transfers with no fixed look-back period. Setting up the trust well in advance, with a clearly documented legitimate purpose, is essential to avoid any challenge to the deprivation of assets.
Other Types of Property Trusts
Discretionary Trust: Trustees have the flexibility to distribute assets among a class of family members based on changing circumstances, rather than fixing shares in advance. Useful where family situations are complex or likely to evolve.
Life Interest Trust: A named beneficiary can live in the property or receive income from it during their lifetime. The capital is preserved for the ultimate beneficiaries. The surviving partner continues to live in the family home without owning it outright.
What About Capital Gains Tax?
Capital gains tax (CGT) is a consideration when property held in trust is eventually sold. The rules differ depending on whether it is a discretionary trust or a life interest trust, and how long the property has been held. CGT thresholds have also shifted in recent years, making professional advice on this point essential.
Step-by-Step Summary
- Assess your situation: Consider estate value, family structure, and goals around care costs or IHT.
- Convert to tenants in common: Register a Deed of Severance at the Land Registry.
- Draft Wills with trust provisions: Work with a qualified Will writing specialist to ensure the terms are legally sound.
- Appoint trustees: Choose reliable people who can manage the trust responsibly.
- Register the trust: HMRC’s Trust Registration Service requires compliance and ongoing reporting.
- Set up a Lasting Power of Attorney: If you lose capacity before planning is complete, your options close. An LPA keeps trusted people in control.
- Review regularly: Revisit after major life events such as births, deaths, marriages, or significant changes in property value.
Common Misconceptions
“Trusts are only for the wealthy.” HMRC data shows 835,000 active trusts in the UK. They are widely used by ordinary families, not just those with large estates.
“The seven-year rule protects me.” The inheritance tax seven-year rule does not apply to care fee assessments. Local authorities can look back much further.
“I will lose control of my home.” Not necessarily. As a trustee of your own trust, you can retain significant involvement depending on how the structure is drafted.
Act Now, While You Still Can
Inheritance tax thresholds remain frozen until at least 2028, and from April 2027, unused pension assets will also be subject to IHT. The longer you wait, the fewer options remain open to you.
Our specialist team at Paradigm Wills guides UK families through setting up a UK property trust, protected property trust arrangements, Will writing, and comprehensive estate planning. Speak directly with our estate planning specialist to get started with a consultation tailored to your circumstances.
Paradigm Wills & Legal Services Serving Birmingham, Leicester, Ealing, Hampstead, Harrow, Highbury, London, and Tottenham. Contact us at 0116 464 7055. Do not leave your family’s future to chance. Act now.
