A protective property trust is a legal arrangement that can be included in your will to safeguard a share of your property for your chosen beneficiaries. These trusts are commonly used by couples who want to ensure that their children ultimately inherit from the family home, even if circumstances change after the first partner dies.
This guide explains how protective property trusts work, why people use them, and what you should consider before including one in your estate plan.
In this guide
What is a protective property trust?
A protective property trust is a type of trust that comes into effect when one partner in a couple dies. Instead of the deceased person's share of the property passing outright to the surviving partner, it is held in trust for the benefit of named beneficiaries, typically the children.
The surviving partner retains the right to live in the property for the rest of their life. They can continue to treat the home as their own, but the share belonging to the deceased is protected and cannot be used, sold or given away without following the terms of the trust.
When the surviving partner eventually dies, the protected share passes to the beneficiaries named in the trust, along with any share the surviving partner has chosen to leave to them.
How does a protective property trust work?
For a protective property trust to work, the property must usually be owned as tenants in common rather than joint tenants. When property is owned as tenants in common, each person owns a defined share that they can dispose of independently through their will.
When the first partner dies, their share of the property is held in trust according to the terms set out in their will. The surviving partner becomes a life tenant, meaning they have the right to live in the property or benefit from it during their lifetime.
The trust is managed by trustees, who may include the surviving partner along with other trusted individuals such as adult children or a professional. The trustees have a responsibility to manage the trust according to its terms and in the best interests of all beneficiaries.
Why do people use protective property trusts?
Couples choose protective property trusts for various reasons. The most common motivations include:
- Ensuring children inherit from the family home regardless of what happens after the first death
- Protecting assets if the surviving partner remarries and the new spouse might otherwise inherit
- Providing security for a surviving spouse while preserving capital for the next generation
- Managing assets in blended families where both partners have children from previous relationships
- Maintaining some control over how assets are ultimately distributed
Protection in cases of remarriage
If your partner remarries after you die, their new spouse could potentially inherit from your estate at the expense of your children. A protective property trust ensures that your share of the family home is preserved for the people you chose to benefit.
Providing for blended families
For couples where one or both partners have children from previous relationships, protective property trusts can help balance the needs of the surviving partner with the expectations of all children involved. This clarity can help prevent disputes after both partners have died.
Long-term care considerations
Some people are concerned about how their assets might be treated if the surviving partner needs long-term care. While a protective property trust cannot guarantee protection from care fee assessments, it may provide some separation between the deceased partner's assets and those being assessed.
It is important to understand that the rules around care fee assessments are complex and subject to change. Local authorities have powers to investigate transfers of assets, and a trust set up primarily to avoid care fees may not achieve its intended purpose. Always seek specific advice about your circumstances.
Protective property trusts and wills
A protective property trust is created through your will. It only comes into existence when you die, which means you retain full control of your assets during your lifetime. The will sets out who the beneficiaries are, who the trustees will be, and what rights the surviving partner has.
For the trust to work as intended, it must be correctly drafted. This includes ensuring the property is held as tenants in common, the trust terms are clear and comprehensive, and the will itself is properly executed.
Professional will writers regularly help clients in Kent, including Tonbridge and Sevenoaks, to set up protective property trusts as part of their estate planning. Working with a professional ensures the trust is properly structured and that you understand how it will work in practice.
Who might consider a protective property trust?
Protective property trusts are most commonly used by:
- Homeowners who want to protect their property for children or other beneficiaries
- Couples in second marriages or with children from previous relationships
- People who want to ensure their share of assets goes to specific individuals
- Those concerned about what might happen if their partner remarries
- Couples who want clarity and certainty about how their estate will be distributed
Things to consider before using a protective property trust
While protective property trusts offer clear benefits, there are also factors to consider before deciding whether one is right for you.
Trustee responsibilities: The trustees will have ongoing duties to manage the trust properly. This includes maintaining records, making decisions about the property if circumstances change, and eventually distributing assets to beneficiaries.
Flexibility: Once the first partner dies and the trust takes effect, the terms cannot easily be changed. The surviving partner cannot simply sell their share of the property without reference to the trustees and beneficiaries.
Professional advice: Because of the legal complexity involved, it is important to work with a qualified professional who can explain how the trust will work in your specific circumstances and ensure it is drafted correctly.
Frequently asked questions
What is a protective property trust?
A protective property trust is a legal arrangement included in a will that protects a share of property for named beneficiaries, typically children, while allowing a surviving spouse or partner to continue living in the property.
Is a protective property trust legally binding?
Yes. When properly drafted and included in a valid will, a protective property trust is legally binding. The trustees have a legal duty to manage the trust according to its terms.
Do protective property trusts avoid care fees?
Protective property trusts are not designed specifically to avoid care fees, and the rules around care fee assessments are complex. While a trust may offer some protection, it cannot guarantee that assets will be excluded from means testing. Always seek professional advice about your specific situation.
Do I need professional help to set up a protective property trust?
Yes. Protective property trusts must be correctly drafted and included in a valid will to be effective. Professional will writers and solicitors can ensure the trust is properly structured and legally sound.