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What are the benefits of having a Property Trust in place and do I actually need one are some of the many questions the team at Swansea Legal Solutions are asked on a regular basis?
In short, and according to the Society of Will Writers, “creating a property protection trust through your will allows someone to benefit from your estate after you have died as if he or she owned the assets, without actually inheriting it. The value of his or her estate is therefore kept minimised.”
Life Interest Trusts
A life interest trust is typically used to allow someone to benefit from assets, without owning them. For example, if you have a disabled child who doesn’t have mental capacity to manage his financial affairs, you may opt to place your estate in a trust, managed by other family members for your child’s benefit. Your wealth enables your child to be cared for, with the trustees making the decisions about how best your estate should be used to do so.
The same structure is used to ‘protect’ property from means tested fees. Your husband or wife never inherits the assets, so they never count as part of his or her estate from which fees can be paid, yet he or she can benefit from them as if they were owned. On his or her death, the remaining estate passes to other beneficiaries who do inherit it.
Why Use a Property Protection Trust?
If you have children and you die without having made a will, then your spouse automatically inherits the first £250,000 of value in the estate and half of the remainder. The children receive the other half of the remainder.
Many couples make wills that transfer all of the estate to the other, if the other survives, otherwise all to children.
The intention in both cases is for the survivor to be able to live comfortably for the rest of his or her life, before the joint wealth that both parents have accumulated over their lifetimes is passed on to the next generation.
In these situations, the surviving spouse will be better off financially as an individual as a result of the death of his or her husband or wife. The main point of consideration is that the surviving spouse will have more funds that can be used to pay care fees before falling back below the threshold. And many people feel that care fees erode what would otherwise be the children’s inheritance.
Why Create a Property Protection Trust through a Will?
The reason it’s a good idea to create a property protection trust through your will is to prevent the wealth of the person who dies first from being used to pay for care fees for the spouse. Your children inherit a greater value.
In some instances, it can be a good idea to set up a property trust during your lifetime so that you can also avoid paying care fees yourself.
Another common use of these trusts is if you live with a partner and are not married or if you have remarried, if you leave the property directly to your partner or spouse, he or she decides what happens to it through his or her will.
This can become an issue if you have children from earlier relationships who may not be in the will of your spouse or partner (particularly if he or she remarries after your death). You are likely to want to support your surviving partner or spouse while they are alive, but you also want to make sure your children inherit.
Making a Will with a Property Protection Trust
The specialist team at Swansea Legal Solutions can help with all types of wills and other estate management services including setting up property protection trusts in your will.
You can read more about this service here or call us on 01792 420 844 to book an appointment either at our offices (with free parking) or in the comfort of your own home.
