Protective Property Trust

Often when a couple owns a house together, and one partner dies, the share of the deceased is automatically transferred to the surviving partner under the ‘right of survivorship’. Rather than the remaining property owner acquiring the share, The Protective Property Trust (PPT) or home protection trust is designed to ensure that a percentage of the property is transferred to the chosen beneficiaries selected by the homeowners.

At Paradigm, we can set up a PPT (property protection trusts) providing both homeowners are alive and hold property as ‘Tenants in Common.’ This is when both partners own undivided interest in the property, which becomes part of an estate when one dies (although this fixed percentage or proportional financial share of the property can vary). 

Why would you not leave your surviving partner your share of the estate?

Control over ownership is particularly common if you or your partner have children from previous relationships. You can leave your share of the estate to your children or chosen beneficiaries, and they will receive the inheritance after the death of your surviving partner.

What about if you are the surviving partner and want to move house?

As the surviving partner, if you wish to sell and move to another property, the proceeds from the sale can be used to purchase the second property, but the terms of the protective property trust will remain over the second property. If there is any excess capital following a sale, then the money can be invested, and you can take the interest generated as income.

What happens when both partners pass?

The trust ends when the surviving partner passes away, and the property is left to the named beneficiaries in the will.

Let’s look at an example:

Mr and Mrs Smith are joint homeowners who have both previously married and divorced. Mr Smith has two children from a previous marriage, and Mrs Smith has one. They also have one child together. 

Without a Protective Property Trust

If Mr Smith passes away first, his share will automatically be left to his wife under the right of survivorship. Without a home protection trust, his two children from his previous relationship will not inherit any of the estate. Circumstances after his passing can also start to change over which he has no control. For example, Mrs Smith could make a new will, writing out Mr Smith’s children as she is no longer involved in their lives. Equally, she could feel pressured by her own child to leave out Mr Smith’s two children. She could even meet a new partner, who is then left with the entire estate when she passes away. Following the passing of the new partner and per ‘the rules of intestacy’, the bloodline of the new partner would inherit everything, and Mr or Mrs Smith’s children would be left with nothing.

What we recommend

To prevent this situation, Paradigm would help Mr and Mrs Smith to create a Mirror Will with a Protective Property Trust and sever the tenancy if needed. This measure ensures that the property ownership is divided in half, with both partners owning a fixed 50% of their property. In the will, we would create a ‘life interest’ for both partners, so rather than inheriting each other’s share, they would only give a full life interest to the surviving spouse.

With the trust in place

After Mr Smith’s passing, his 50% share of the property goes into the protective property trust, which gives Mrs Smith a life interest to remain in the house. Mrs Smith can move house if she wishes, but cannot spend the capital on unnecessary things. However, she can take an income from the trust because Mr Smith has safeguarded his 50% of the estate from the potential threat of disinheritance, sideways inheritance, and the risk of the share being used to pay for care home fees.

When do the children receive the inheritance?

Mr Smith’s children will only receive access to his trust upon the passing of Mrs Smith. Then, all beneficiaries will inherit according to the instructions of the will. Again, if Mrs Smith did meet a new partner or required residential care with the Protective Property Trust, Mr Smith’s half of the estate would be ‘ring-fenced’ (separated and protected) and, therefore, untouched.

An inheritance tax specialist can provide tailored advice to help you navigate the complexities of inheritance tax. They can assist in structuring your will, setting up trusts, and making lifetime gifts to reduce the taxable value of your estate. Their expertise ensures that you make the most of available exemptions and reliefs, ultimately protecting more of your wealth for your beneficiaries.

With our continued support, we free you from the burden of worry and provide you with peace of mind that your assets will be inherited by your loved ones when you are no longer here.

At Paradigm Wills and Legal Services, we genuinely care about educating people on the importance of making a lasting power of attorney in Leicester. In an industry often loaded with complex legal jargon and a conveyor-belt mentality, we provide a paradigm shift in how we offer our wills services. We aim to supply fresh ideas, clear and straightforward explanations, and a service tailored specifically to you. With you at the centre, we strive to make the will writing process as transparent as possible.

Contacting us is free. Have a consultation or a home visit with one of our experts and discuss your options with no obligation.

Our team of seasoned legal advisors is always available to offer comprehensive support and expert advice. Whether you're looking to draft a will, establish a trust, navigate the complexities of applying for probate, or arrange for prepaid funeral plans, we've got you covered. Our goal is to simplify these processes for you, ensuring clarity and peace of mind every step of the way.

 

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