Property Protection Will Trusts
A Powerful Tool to Protect your Property & Assets.
A Trust in Your Will
1. Protect your property from residential care fees
2. Protect your children in cases of re-marriage after death.
3. Protect your grandchildren from effects of divorce or bankruptcy.
Care Home Fees.
Currently if you have property & assets valued at over £23.250 then you will have to pay any care home fees personally. If you have assets with a value of between £23.250 & £14.250 then you pay some of the fees and if you have assets valued below £14.250 the Local Authority picks up the bill.
Using your will to transfer assets to a trust can help to minimise the amount you pay in care home fees.
Re-Marriage after Death.
If the surviving partner remarries then their new spouse can become entitled to the entire estate and your children may miss out.
Transferring your share of your assets to a trust in your will can ensure that your bloodline children receive the legacy you intend.
Divorce or Bankruptcy
Transferring assets to a trust created by your will can protect any legacies you intend for your grandchildren should their parents be unfortunate enough to divorce or go bankrupt.
Your Property Will Trust with New Approach.
1. Ownership is severed so you become Tenants in Common and are able to chose what happens to your share of the property at the end of the trust.
2. This guarantees at least half of your property is protected. (Steps can possibly be taken to protect more).
3. The survivor benefits for the duration of the trust (usually their life).
4. Currently, if 50% of a property is owned by a trust then when assessing assets for purposes of calculating liabilities for care home fees, the Local Authority must value the property at zero. (The Palfrey Principle.)
Myths about Trusts
1. The Seven Year Rule. Does not apply to trusts, only to Inheritance Tax.
2. Deliberate Deprivation of Assets. Does not apply to trusts created by a will (only to lifetime trusts.)
3. Expensive to administer. There is no charge for administering a trust created by a will.
4. Permission of beneficiaries needed. No, the survivor continues to enjoy full rights to enjoy the property in their lifetime.
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A DIY Will may seem attractive but is only suitable for very straightforward, low value estates.
The Flexible Life Interest Trust.
A Flexible Life Interest Trust can allow a person to benefit immediately upon the death of a testator whilst protecting the assets for others.
In what circumstances would a Flexible Life Interest Trust be used?
In a case where a testator is married for the second time and has children from their first marriage, the interests of the wife and the children can be protected by putting property or assets into a Flexible Life Interest Trust. It can also be used to protect any vulnerable adults.
How does a FLIT work?
Upon first death, rather than assets passing straight and outright to the surviving partner, they go into a trust. The trustees hold the assets and pay any income to the survivor for the rest of their life. The survivor has a “life interest” in assets and this can also be a right for them to occupy any property within the estate for their lifetime. Trustees also have the power to rearrange any capital and income during the lifetime of the survivor, allowing for second death IHT planning.
As an example, this type of trust would enable the testator to gift his estate to his wife for her lifetime, meaning that she would be entitled to live in the property and receive any income from any investments etc, and then on second death the trust will become a full discretionary trust for the children and descendants.
What are the advantages of using a FLIT?
Using a FLIT is a good way of controlling your estate and what subsequently happens to that estate upon second death and allows for the distribution of assets to future generations in a way that you and your trustees consider best.
The Property Protection Trust.
A Protective Property Trust (PPT) can be established which will help to protect your estate from being taken to pay for care home fees.
The Property Trust can only be created whilst both partners remain alive. Upon the first death, their share of the property is placed into the Trust and the Will will specify who is to be the ultimate beneficiary of this share in the property, usually surviving children of the deceased.
The surviving partner has the right to remain living in the property for the rest of their life. Upon their death the Trust comes to an end and the property passes absolutely to the beneficiaries. The surviving partner does not own the deceased's share of the property.
The deceased's share in the property is fully protected for the beneficiaries, so even if the surviving partner remarries, the children's inheritance is protected. This last point can be of particular interest to couples who have come together and have children from different partners. A PPT can help each person in a relationship ensure that their children inherit their share of the property, while giving their surviving partner the ability to live in the property for the rest of their life.