We often have clients coming into our Swindon Will writing offices to discuss protecting their home by signing it over to their children or changing the ownership in some other way.
The first thing I always say is DO NOT sign your house over to the children if you still intend to live in it! It may seem an easy way to avoid the problems of probate, inheritance tax or care home fees but it is fraught with danger. Everything may be perfectly amicable now but what if your child were to have money problems? Was to die? Was to get divorced? You fell out? Your home would be at risk of being sold or even totally lost. Leaving you homeless.
Not to mention the many tax issues and accusations of deliberate deprivation by the local authority.
What opportunity is there to protect my home?
There are various trusts options available, and we are happy to talk through these with you. The one I would like to expand on in this blog is probably the most widely used which is a Protective Property Trust (PPT). Such a trust is written into Mirror Wills and on first death the trust transfers the deceased’s share in their main residence and gives another person known as the life tenant (usually a surviving spouse or partner) a life interest in the property. This enables them to live in their home for the rest of their life, or for a specific period.
If the life tenant wishes to move home, the trustees can have the authority to sell the property and use the proceeds to purchase a substitute for the life tenant to live in. Any additional proceeds from the sale of the family home will can remain in trust and the income from the funds could be be paid to the life tenant if that is the deceased’s wishes. There may also be powers to advance capital to the life tenant if so required.
On the death of the life tenant or the end of the specified period, the property can pass to other beneficiaries. These are usually the deceased’s children.
Why use a Protective Property Trust?
The most common reason for using a PPT is to ensure that the co-owner’s share in the home will be guaranteed to pass to their children. Gifting their share in the home to the survivor outright via a standard Mirror Will or allowing it to pass to them by joint ownership can cause several problems.
If the survivor remarries, the house could be passed to their new spouse under a new Will or by intestacy. Did you know re-marriage revokes any existing Will unless it has been stipulated not to within the old Will? If this new marriage ends in divorce, the house could form part of the divorce settlement. A PPT will ensure that the children (or other chosen beneficiaries) inherit the deceased’s share.
A surviving spouse could be subject to long term care fees or bankruptcy in the future. If the deceased puts their share of the property into a PPT when they die, that share will be owned by the trust rather than the spouse outright and is therefore sheltered from the surviving spouse’s potential long term care fees or bankruptcy.
PPTs can also be useful for couples who each have children from previous relationships. In such cases the survivor can be allowed to live in the home, and each can leave their own share in the home to their own children. This avoids the surviving spouse from potentially disinheriting them.
Standard Wills do not provide this sort of protection. At Farsight Wills we can insert a PPT into Mirror Wills giving a much higher level of protection to what is often people’s greatest asset. The Family Home.
If you would like further information on Protective Property Trusts or any Estate Planning please feel free to contact our Swindon office on 01793 433705 for a free and informal chat. Alternatively go to our Contact Page or download our free information pack which goes into more detail.