Protective Property Trusts

Protective Property Trusts

The Protective Property Trust or PPT is probably the most widely used ‘Will Trust’ today. The PPT has many advantages over a discretionary trust far beyond simply being used to shelter assets from long term care fees and its implications.

What is the background to the PPT and how can it be utilised across a wide range of ages and clients?

Put simply; property held in the joint names of two or more people cannot be gifted by Will until it eventually passes to the last remaining ‘beneficial joint tenant’. The effect of this is that where assets are held in joint names, in the case of the first to die, everything passes to the survivor or survivors irrespective of what is in the deceased’s Will and can mean that the children or named beneficiaries of the deceased may not inherit.

Why changing from beneficial joint tenants to ‘tenants in common’ works. As has already been stated property owned jointly passes by automatic succession to the survivor. Property owned as Tenants in Common ensures that each party to the property/asset is free to Will their share via their Will. Take as an example, a young couple married (although in property ownership it can be unmarried or same sex couple) with a young family.

They are buying their first house; and as is common where there is a joint mortgage, the title is conveyed to the couple as joint tenants. If something was to happen to one or the other, and say the husband died un-expectantly, the house would pass to the wife; not a problem you might think. A life policy settled the mortgage so she now owns the house in her sole name. Still good you might think.

Whilst they were both alive they considered making a Will, but never got around to it as it was something that could be done later. The husband’s estate is now dealt with under the Rules of Intestacy; the rules applied when someone dies without making a Will.

Click here to find out more about ‘Rules of Intestacy ‘

On the death of the husband, the house passed automatically to his wife, not a bad solution; reduces the problems sometimes associated with gaining probate and the survivor is provided for.

What of the children? Suppose the survivor remarries and that marriage fails; does the house form part of a divorce settlement? And if it does, where does that leave the children of the deceased?

The PPT can be especially useful for couples who have been married before and have children from that relationship who they want to benefit from their share of the estate. The use of trusts today in Wills has probably never been more important.

The Solution

Had they both made Will, they could have served the joint tenancy to tenants in common; and in their Wills created a trust, effective on death, giving the survivor the right to live in the house for the remainder of their lives but the trustees holding the deceased’s share in trust for the children when the survivor (the life tenant) eventually dies or relinquishes the right to the trust asset.

The PPT does not restrict the rights of the survivor to sell and move home, they can release funds from the trust by downsizing but the deceased’s share always remains under the control of the trustees.

Even if the survivor were to remarry or cohabit or require residential care, the share held by the trustees is protected, effectively ‘ring fencing the deceased’s estate’ against the unknown and unforeseen whilst ensuring that the survivor is provided for.

For more information and advice please contact Jason Thomas – 0845 365 1000