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An increasing number of people are starting to consider the possibility of a need for care in the future, and the financial impact it may have on them. Products like property protection trusts enable you to save a portion of your property to pass on to loved ones. They are also known as ‘Property Trust wills’.
In this article we’ll cover:
– What is a protective property trust will?
– Who are these trusts best suited to?
– How do property trust wills work?
– How much setting up a protective property will cost?
– How to set up a protective property trust
A protective property trust is a type of legal structure that can be included as part of your will.
It is designed to protect your property 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.
A property protection trust will covers a share of a jointly-owned property to ensure that surviving spouses or partners can continue to benefit from their deceased partner’s share in their property 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.
This type of will is best suited to couples that are married or in 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 property against the cost of possible future care fees
– You want to ensure that your children receive at least half of the value of your property 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
Normally when you set out your wishes and make a will, your estate and assets will be passed directly on to your beneficiaries. A care requirement and other circumstances can sometimes complicate or affect this process.
Here is a video we have produced that sets out why you need a Will.
For this reason property protection trusts and products like them can hold assets on behalf of the beneficiaries to guard against the effect of inheritance tax and deductions made due to care costs.
The best way to explain how property protection trusts work 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 have the peace of mind of knowing that if the surviving person requires care, at least half the property 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 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 property 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 value of the property cannot be taken and used to pay for care fees – and the property cannot be sold to pay for care fees.
This type of protection trust 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.
Here is a short video that explains more about property trusts.
The amount a protective property trust will cost varies depending on which provider you choose.
Generally a protective property trust will cost between £350 and £500. The protective property trust will cost is higher for couples registering together than it is for individuals. Usually this is a fixed fee – a one-off payment for the set up and registration of the plan.
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Together a couple make a will leaving their share of their property within a protective property trust which is set up as part of the will. You will then become trustees. This type of will can be set up online via the trust 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. When choosing a person to help you or a provider look for companies and individuals authorised and regulated by the Solicitors Regulation Authority or SRA.
The specialists that we will put forward to you know have all the relevant industry qualifications, so you can have some comfort that you are being dealt with by a professional.
There aren’t any directly comparable products on the market – but there are different types of trusts 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 Will may be more appropriate for you.
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 property protection trusts, charities such as Age UK and Citizen’s Advice Bureau can offer impartial support.