Property Protection Trusts (PPTs) are by far the most common types of trusts included in wills.
The PPT is designed to take the deceased share in the home, and give someone else (known as a life tenant) a life interest in the property, which will give them protection of living in the property for the remainder of their lifetime, or earlier if the trust specifies i.e. remarriage. It also ensures that if the survivor requires long-term care, at least half the property is preserved for the benefit of their beneficiaries who are normally the deceased children.
These types of trusts are normally used for married couples or civil partners, to ensure the share of the home will ultimately pass to the children at the end of the trust period, whilst still insuring the interest of the surviving spouse are protected.
For example a married couple, who have not been married before, want to leave their share of their house to their only child. They currently own the house as joint tenants. In this instance the estate planning consultant, or persons being asked to draft the will, will severe the tenancy of the property, registering them each as 50% owners. There is a process through the HM Land Registry for this to be achieved. They then have their wills written to represent that if one died, their half of the property would be held on trust for the benefit of their child, but allowing the survivor to live in their share of the property for life or a specified period of time.
In order for the trust to be achieved, the property must be held as “tenants in common” to enter the trust.
Holding the property as tenants in common means that each owner holds a share of the home which can be gifted via their wills. We would always advise the title is checked as there are occasions where clients may believe their home is held as tenants in common when, upon checking to verify this, the home is in fact held as beneficial joint tenants. There is a fee involved in checking this with the HM Land Registry.
We are often asked to do this, but we find that on investigation there is a mortgage on the property.
It is important to know that a property can not enter a life interest trust on death until the mortgage has been settled, they are not seen to own the property. There are various solutions to this problem but that is for a separate article.
What is the point of a Property Protective Trust?
The main reason for a Property Protective Trust is the protection is afforded for the beneficiaries i.e. the children, to insure that they are protected and ultimately receive a share of the home.
If you need advice on your will, or setting up a Property Protective Trust within your will please contact us.