Wills vs Protective Property Trusts: Which One is Best?
Estate planning is a crucial step in securing your assets and ensuring that your loved ones are taken care of when you're no longer around. Two commonly used tools for estate planning are wills and Protective Property Trusts (PPTs). Both serve distinct purposes and offer unique advantages. In this blog, we'll compare wills and PPTs to help you determine which option aligns best with your specific needs and estate planning goals.
A will is a legal document that outlines your wishes regarding the distribution of your assets after your passing. It allows you to designate beneficiaries and specify how your assets, such as property, finances, and personal belongings, should be distributed among them. You can also appoint guardians for minor children in your will.
Advantages of Wills:
Flexibility: Wills provide flexibility in asset distribution. You have the freedom to allocate specific items, percentages, or lump sums to each beneficiary.
Guardianship Designation: Wills allow you to name guardians for your minor children, ensuring their well-being in the event of your untimely passing.
Simplicity: Wills are relatively easy to create and can be cost-effective compared to other estate planning tools.
Limitations of Wills:
Probate Process: Wills typically go through probate, which can lead to delays and additional costs before assets are distributed to beneficiaries.
Public Record: Wills become public documents once they go through probate, potentially exposing your private financial affairs to scrutiny.
Inheritance Tax Impact: Inheritance tax may apply to assets passing through a will, potentially reducing the amount inherited by beneficiaries.
Understanding Protective Property Trusts (PPTs)
A Protective Property Trust is a specialized type of trust designed to protect your share of a jointly-owned property while ensuring your partner or spouse can continue living in it after your death. The trust preserves the property's value for your chosen beneficiaries, often children or family members, and protects it from being used to cover long-term care costs or potential inheritance tax.
Advantages of Protective Property Trusts:
Property Preservation: PPTs safeguard your share of the property, allowing your partner to reside in it while securing its future for your beneficiaries.
Inheritance Tax Planning: PPTs can help mitigate potential inheritance tax liabilities, maximizing the amount your beneficiaries receive.
Avoiding Probate Delays: Since the property held in a PPT avoids probate, the transfer to beneficiaries can be quicker and more straightforward.
Limitations of Protective Property Trusts:
Specific to Property: PPTs are primarily designed to protect property, and their scope is limited to jointly-owned properties.
Initial Complexity: Establishing a PPT may involve more complex legal and financial steps compared to creating a simple will.
Which option is best for you?
The choice between a will and a Protective Property Trust depends on your individual circumstances and estate planning objectives:
Consider a Will if:
- You have relatively straightforward asset distribution needs.
- Designating guardians for minor children is a priority.
- You prefer a more straightforward and cost-effective estate planning solution.
Consider a Protective Property Trust if:
- You jointly own a property and wish to protect your share for your beneficiaries.
- Mitigating potential inheritance tax liabilities is important to you.
- You want to ensure your partner or spouse can continue living in the property after your passing.
Both wills and Protective Property Trusts are valuable estate planning tools, each offering unique benefits and considerations. To make an informed decision, assess your specific needs, estate complexity, and goals for your loved ones' future. Consider consulting with an experienced solicitor or estate planning expert to guide you through the process and create a comprehensive plan that aligns with your vision for the distribution of your assets and the protection of your family's legacy.
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.