Protective Property Trusts: A Guide for UK Homeowners
Protective Property Trusts (PPTs) have become a popular way for UK homeowners to protect their property assets and ensure that they are passed on to their intended beneficiaries. In this blog post, we'll look at what PPTs are, how they work, and why they might be a good option for you.
What is a Protective Property Trust?
A Protective Property Trust is a type of trust designed to protect a property's value and ensure that it is passed on to the intended beneficiaries. The trust works by allowing the homeowner to transfer their share of the property into the trust while still allowing them to continue living in and using the property. This means that they can benefit from any increase in the property's value while still having control over it.
Is a Protective Property Trust the same as a will?
No, a Protective Property Trust is not the same as a will. While both are legal documents that relate to the distribution of assets after death, they serve different purposes.
A will is a legal document that outlines a person's wishes to distribute their assets after they die. It can be used to distribute any assets, including property, and allows the person to name beneficiaries and executors. A will can also be used to name guardians for any minor children.
A Protective Property Trust is a legal arrangement designed specifically to protect the value of a property and ensure it is passed on to the intended beneficiaries. The trust allows the homeowner to transfer their share of the property into the trust while still allowing them to live in and use it. While a will can be used to distribute a property, a Protective Property Trust offers additional benefits, such as protection from long-term care costs and potential reductions in Inheritance Tax.
It's important to note that a Protective Property Trust can work alongside a will to ensure that all assets, including property, are distributed according to a person's wishes.
How does a Protective Property Trust work?
A Protective Property Trust is set up by creating a trust document that outlines the terms and conditions of the trust. The document will typically name the trustees (who will manage the trust) and the beneficiaries (who will benefit from the trust). The document will also set out how the trust will be managed and how any income or capital gains from the property will be distributed.
Once the trust document has been created, the homeowner can transfer their share of the property into the trust. This can be done by a simple declaration of trust, which sets out the terms and the property to be held in trust. The declaration of trust is then registered with the Land Registry.
The homeowner can then continue to live in the property and use it as they wish, while the trustees manage the property on behalf of the trust. When the homeowner dies, their share of the property held in the trust will pass to the beneficiaries named in the trust document. If the property has increased in value during the homeowner's lifetime, this increase in value will also be protected and passed on to the beneficiaries.
Who is a Protective Property Trust for?
There are several reasons why a Protective Property Trust might be a good option for you.
- Protect the value of your home
A PPT can help to protect the value of your property and ensure that it is passed on to the intended beneficiaries. This can be particularly important if you have children from a previous relationship, as it can help to ensure that your share of the property is passed on to them.
- Prevent your property from being used to pay for care
A PPT can help to protect your property from being used to pay for long-term care. If you need to go into a care home, the local authority may look to sell your property to pay for your care. However, if your property is held in a Protective Property Trust, it may be protected from being used to pay for your care.
- Reduce Inheritance tax
A PPT can help to reduce the amount of Inheritance Tax that your beneficiaries will have to pay. When you die, your estate will be subject to Inheritance Tax, which is currently set at 40% on estates worth over £325,000. However, if your property is held in a Protective Property Trust, it may be possible to reduce the amount of Inheritance Tax that your beneficiaries will have to pay.
The trust can also protect your share of your home if, for example, your spouse/partner:
- Gets married or has a new partner
- Becomes bankrupt or gets into debt
- Changes his/her Will
Ultimately, anyone who wants to safeguard their property assets and ensure they are passed on to their loved ones can benefit from setting up a Protective Property Trust.
What age should you arrange a Protective Property Trust?
There is no specific age at which someone should consider setting up a Protective Property Trust. It is generally a good idea for homeowners to consider setting up a trust at any age if they have concerns about protecting the value of their property and ensuring it is passed on to their beneficiaries.
Could a Protective Property Trust be for you?
In conclusion, a Protective Property Trust can be a good way to protect the value of your property and ensure that it is passed on to your intended beneficiaries. If you're interested in setting up a Protective Property Trust, it's important to seek professional advice to ensure that it is set up correctly and meets your individual needs and circumstances.
Jonathan Owen and his team of financial planners have more than 15 years of experience helping generations of families prepare for their future.
If you have any questions about Protective Property Trusts, book a free consultation today, and we’ll be happy to help.