You can establish a trust during your lifetime 0r; through your will, on your death. You can appoint trustees of your choice (this can include you and your spouse during your lifetimes) who will manage the trust on your behalf. Following your death, the trustees will act with consideration to your wishes.
Trusts offer several benefits:
- On your death, the trust asset can pass to your chosen beneficiaries with no need for probate
- In certain circumstances, trusts can protect your assets from creditors
- You can control who benefits from your assets during your lifetime and on your death
- Depending on how the trust is structured, it is possible to invest your assets into a trust to mitigate inheritance tax, income tax, and capital gains tax (principle private residence relief)
- Protect your estate against potential future care fees
You may also wish to reserve some influence over your assets for the trustees to observe after your death.
- You may want to delay the age at which beneficiaries inherit
- You may want your heirs to receive their inheritance in stages
- You may be concerned about your heirs getting divorced and want to protect the assets inherited from you being included in a divorce settlement
Trusts can also be useful in preventing assets reaching a beneficiary facing insolvency proceedings and those making poor lifestyle choices, such as involvement in alcohol and drugs.
Property Protection Trust
Owning your home as tenants in common rather than joint tenants provide additional planning opportunities. This can potentially protect inheritance in terms of residential care fee assessment and marriage following bereavement.
A property protection trust is put in place so that the half share of the family home belonging to the first person to die passes into the trust (also known as a life interest trust). This allows the surviving spouse to benefit from the share of the house during their lifetime. Following the surviving spouse’s death, the property can then be passed on to either children or loved ones. By putting this trust in place, you are ensuring your assets are going exactly where you want them to go and giving you total peace of mind.
The benefits of a property protection trust are:
- Each spouse now owns 50% of the property
- Each spouse grants the surviving spouse a ‘right to reside’
- Allows you to pass your property to your chosen beneficiaries
- Each spouse can gift their 50% as they see fit: (both halves of the property do not have to go to the same beneficiaries)
- Allows you to nominate your chosen Executo1·s/ Trustees to handle the property on your behalf
- Can be used as a tool for planning for care home fees
Please be aware that should the survivor remarry, not make a new will and then die, intestacy rules would see the new spouse taking a disproportionate amount of the estate. By severing the tenancy and creating a life interest trust in your wills (for the surviving spouse), this means your assets are going exactly where you want them to go and giving you total peace of mind. To preserve the residential nil rate band, property needs to pass to direct descendants.
Get in touch
For more guidance on the benefits of setting up a property protection trust and for more information on our inheritance tax planning services, please get in touch with us.