What is a property trust Will?
There are many different potential reasons why you may wish to consider setting up a property trust Will.
Property Trust Wills can help to protect your assets against the expense of care fees, future relationships, financial difficulties amongst other reasons.
You need to ensure that you either own the whole legal and beneficial interest in the property or a defined share for the trust to be effective in practice.
Where you own the property with another person, you need to ensure you own a defined share and in particular own that property with the co-owner/s as what is known as Tenants in Common. The trust can then incorporate your defined share in the property and ensure that any co-owner, which may be a surviving spouse or civil partner can continue to live in the property for the rest of their life, but at the same time also ensures they won't own the entire house in their sole name in the event of your death. This type of Will is called a Property Trust Will.
When setting up a Property Trust Will, as indicated above, you need to ensure that where you own the property with another person, you own that as Tenants in Common as opposed to Joint Tenants.
A Joint Tenancy can often be a 'typical' way of owning a property where in the event of one co-owner dying, their share in accordance with what is known as the law of equity simply passes to the surviving co-owner/s.
Even where you have prepared a property trust Will, if you own a property in this way, the property trust will be ineffective as the law of equity/ right of survivorship will override.
By preparing a Property Trust Will in the right way, the value of your share in your home is 'ring-fenced' by the trust upon the death of the first co-owner to pass away. The result of this is that this share in the home is not then considered to be owned by the surviving co-owner if for instance they were then to be financially assessed for residential care home fees/ get into financial difficulties/ enter a new relationship. Rather, the share that falls into the trust is owned by the Trust.
How does a property trust Will protect against remarriage: -
So, one aspect of this type of trust is that it can also be helpful for protecting assets against subsequent re-marriages. The half share of the house held by the trust does not belong to the surviving co-owner who may be a spouse or civil partner, so they cannot choose to leave it to a new partner for instance.
In this scenario, 'the partner who dies first has the peace of mind that comes with knowing their share of the house will pass to their children (or other chosen beneficiaries), and that this can’t be changed after they pass away. However, as detailed below, they can still ensure their surviving partner/ co-owner still maintains their security of tenure/ certain rights of occupation for instance should they so wish.
How does a property trust Will protect against care home fees:-
Many couples understandably wish to simply leave the whole of their estate to their surviving partner. However, if that surviving partner then requires long-term care, the majority of the combined estate is at risk of being used for funding their care.
Under the current rules, anyone with assets above the ‘upper capital limit’ of £23,250 (both savings and investment is treated as self-funding). This capital limit is decided by the government.
This means they pay for all their own care until their assets reach the threshold, at which point they can apply for assistance with their fees. In order to pay for this care, the Local Authorities can sell your home and use the proceeds towards your care fees if your assets exceed £23,250. This may mean that your hard-earned estate will pass to the government rather than to your family or loved ones.
Is this going to change?
From October 2023, the government intends on introducing a new £86,000 cap on the amount anyone in England needs to spend on their personal care over their lifetime.
In addition the upper capital limit, which is the point at which people will become eligible to receive some financial assistance from their local authority will rise to £100,000 from the current £23,250.
As a result, people with less than £100,000 of chargeable assets will never contribute more than 20% of these assets per year.
The lower capital limit which is the threshold below which people will not have to pay anything for their care from their assets will increase from £14,250 to £20,000.
There will need to be an amendment to the Care Act 2014 which introduces a new way that people within the means test progress towards the cap however, that is subject to parliamentary approval and we at Bequeathed will keep this under review.
It is important to understand the term 'personal care costs' refers only to the components of any care package considered to be related to personal care, not hotel and accommodation costs.
The means test for financial support will continue to work in the same way as it does currently; it determines what someone can afford to contribute towards the costs of their care based on the amount of assets and income a person has.
Benefits of Property Trust Wills:-
Setting up a property trust Will does not mean the survivor/ co-owner is tied to one home for the rest of their life. Rather the trust can be drafted so the survivor is free to move to a different property, should they wish to do so.
The trust also specifies who gets that half share of the house after both owners have died. The surviving co-owner/s is free to gift their share of the house wherever they like or spend it on care fees should this become necessary. The half share of the house held by the trust is protected and, after the death of both owners, will pass to the chosen beneficiaries.
In practical terms, for instance, if you have a property that is owned jointly between two partners for instance as Tenants in Common, when the first partner dies, their half of the house can then be held by their chosen trustees, who look after it throughout the survivor’s life. The survivor can live in the house for the rest of their life and cannot be evicted, and they have the right to receive any income from the property.
Certain factors/ conditions are also often built into the Will which can provide for the trust to potentially come to an end should be the surviving partner re-marry/ start co-habiting with another person for 6/12 months for instance/ permanently vacate the property.
Property Trust Wills can significantly reduce potential liabilities and allow you to keep greater control on how your property is dealt with upon your death.
Property Trusts and property trust Wills are an area that us and our partner law firms have years of experience in. We draft and advise on them regularly, with their benefits generally far outweighing any potential concerns but regardless we advise on them in detail so you can make an informed choice and decide whether they are and may be suitable for you and your family position both now and in years to come.