A Protective Property Will Trust (PPWT) does what it says on the tin – it protects property!

It is a collection of clauses added to your Last Will and Testament to ensure that your share of your property is ultimately left to the people you choose, while also ensuring that a nominated person (known as the life tenant and usually your spouse/partner) can continue to benefit from the property and live in it for the remainder of their lives.

There are three main reasons for including a PPWT in your Will, and these are:

1. To protect against care home fees
2. To avoid sideways disinheritance, and protect your children’s inheritance
3. To resolve disagreements on who should get what

1. To protect against care home fees

We probably all know a family that’s suffered at the hands of the most draconian tax of all, the Community Care Charge, which has eroded virtually all the value of the family home because one of the owners was taken into long-term care.

Firstly, it’s important to understand why homes are seized at all. Every year local authorities in England and Wales seize the homes of around 70,000 families to pay for care costs which can wipe out all but a few thousand of a person’s Estate. However, for the local authority to be able to do so, both of the following conditions must be met:

• The person in care must be worth at least £23,250 (including the value of their home), and
• They must own 100% of their property (excluding the mortgage)

So how can a Protective Property Will Trust prevent this from happening?

To effect a Protective Property Will Trust the property must be owned in JOINT names, BOTH owners must still be alive, AND the property must be owned on a Tenants-in-Common basis, as opposed to a Joint Tenancy basis.

By ensuring that neither party owns 100% of the property outright on the death of the first party the Protective Property Trust clauses in you Will state that the first person to die does not leave their share to the survivor. For the protection of the survivor it is specified that they have a “Life Interest” in the property allowing them to remain in the home until their death. It is even possible for the surviving party to move home with the terms of the Trust. This arrangement means that the survivor only owns 50% of the property and, as a result, the local authority cannot seize the deceased person’s share.

The most important aspect here is that the revised ownership arrangements, and the Will incorporating the Protective Property Trust, must be carried out PRIOR to either of the owners losing mental capacity. Once an owner has lost mental capacity it is too late to effect this measure of protection!

The current cost of long-term care

If you’ve not already thought about what could happen to your home if either you or your spouse/partner have to go into care the current cost of long-term care is likely to be quite shocking. The harsh reality is that the value of your family home can be dramatically reduced by Community Care Charges for long-term nursing and residential care home fees. Currently, nursing home care in England and Wales costs in the region of £750 a week (almost £40,000 annually), and with an average stay in care of about 4-years, the total erosion of the family home could be nearly £160,000.

It’s interesting to note that the cost of setting-up a Protective Property Trust in your Will, including changing the property ownership from Joint Tenancy to Tenants-in-Common at HM Land Registry, is probably less than half of one week’s nursing home fees, and probably totally insignificant in comparison with the savings your Estate could well make!

2. To avoid sideways disinheritance

Many families these days include children from more than one relationship, perhaps because they have remarried. Even if your family structure does not already include a child (or children) from a previous relationship there is a danger that in the event of the death of either one of you, the survivor may remarry, which could create a situation where not all of your children will be catered for, and may be unfairly disinherited.

To understand this important aspect more clearly, let’s consider the following example:

• Alan marries Nora
• Both have been married previously
• Alan has two children from his first marriage (Ben and Charlotte)
• Nora has one child from her first marriage (Paul)
• Since their marriage Alan and Nora have had a child together (Wanda)

Alan and Nora are happily married and when making their Will, as is usual, leave their Estates to each other. They agree that in the event of one of them dying the survivor will “look after” all of the children.

Now let’s take this example a little further. Alan is involved in a serious accident and dies. As a result, Nora inherits the entire Estate. A few years pass and Nora falls in love with, and marries, her new partner, Oliver, who has a child (Steven) from his first marriage. They have no children together.

Again, Nora and Oliver make their Wills and agree to leave everything to each other, and promise each other that in the event of their death the survivor will provide for all their children.

You can probably see the potential problems at each stage.

On the death of Alan, Nora could change her Will to leave the Estate to her two children (Paul, from her first marriage, and Wanda). This would effectively disinherit Alan’s children from his first marriage (Ben and Charlotte).

However, on her death, Nora’s Estate has passed to Oliver, who could now change his Will and leave the entire Estate to Steven, his only child from his previous marriage. By this stage none of Alan or Nora’s children have received an inheritance, despite all the promises that have been made along the way. All the children, apart from Steven), have suffered the effects of sideways disinheritance.

As most of the value of a person’s Estate is usually made up from the value of the family home the effects of sideways disinheritance can largely be avoided by incorporating Protective Property Will Trusts within your Will.

In our example here, if Alan and Nora had used Protective Property Will Trusts their Joint Tenancy ownership of the family home would have been converted into a tenants-in-common basis with each owning 50% of the property. By doing so Alan would have left his 50% share to his children (Ben and Charlotte from his first marriage, and Wanda who he had with Nora). The Protective Property Will Trust incorporates a life interest for the survivor. Nora would have left her 50% share of the property to her two children (Paul, from her first marriage, and Wanda).

So if you are concerned what will happen to your children’s rightful inheritance, then speak to us about including a Protective Property Will Trust in your Will. Let’s face it – none of us know just what’s round the corner – and we’d all hate to think that our children could be excluded from their inheritance. No matter what promises are made, the tendency is for the survivors to protect their own children. All too often children from former relationships can be subject to sideways disinheritance and denied their rightful inheritance.

3. To resolve disagreements on who should get what

The Protective Property Will Trust can also be very useful where joint owners cannot agree as to how the asset should be left. Whilst most couples are happy to mirror each others wishes when it comes to leaving their assets, this is not always the case. Despite being married for a lifetime some married couples have difficulty in deciding how their Estate should be split. It’s a fact that most parents will leave their Estate split equally between their children – but not always. Where couples can’t agree the solution could be to convert the property ownership to a tenants-in-common basis. By doing so each partner can leave their half of the family home whichever way they want!

However, the problem becomes more acute when one party has children, and the other doesn’t. If the childless partner doesn’t get on with their partner’s children they will undoubtedly be insistent that their share of the property goes, for example, to their family, friends or charity. Again, a Protective Property Will Trust will ensure that each other’s wishes are secured, as well as protecting the survivor with a life interest.

What’s not covered?

Although it may seem that the Protective Property Will Trust has thought of everything there are some situations that it doesn’t cater for (e.g. if both owners of a property require long-term care at the same time). It would be impossible to try and list them all here but there is usually a solution available to cover most scenarios.

If your individual circumstances do not appear to be covered by a Protective Property Will Trust we will be happy to arrange a no-obligation home visit with one of our experienced Estate Planning Practitioners who will be able to give you advice on the options available to meet your needs.

What does it cost?

Although the concept of asset protection may seem highly complex, its use can be extremely beneficial to you and your family.

If you would like to discuss how using a Protective Property Trust could help you please get in touch, we will be more then happy to explain how this scheme could protect your property from third parties, as well as protecting your beneficiaries inheritance.

* The Trust registration fee covers the cost of updating the Land Registry records with details of the Trust, and adding the Trustees to the Proprietorship Register. The current fee for this is £800 – £1,000 depending on the value of the property.