What Is a Property Protection Trust and How Does It Work?

For most people, their home is their biggest asset and, understandably, they want some say over what happens to it after they die.

For couples, this can create a particular estate planning question. You may want your husband, wife or partner to be able to continue living in the family home for the rest of their life, but at the same time want your share of the property to eventually pass to your children or other beneficiaries.

Leaving everything outright to your partner may not achieve both of those things. Once they inherit your share of the property, it belongs to them and what happens to it in the future will depend on their circumstances.

A Property Protection Trust can provide another option.

What is a Property Protection Trust?

A Property Protection Trust, or PPT, is a trust included within a Will which usually deals with a person’s share of a property.

It does not involve transferring your home into a trust while you are alive. You continue to own your share of the property as normal and the trust only comes into effect following your death.

A typical arrangement allows the surviving spouse or partner to continue living in the property, often through a life interest created by the Will. The deceased person’s share is held within the trust and can eventually pass to the beneficiaries they have chosen.

For many couples, those beneficiaries will be their children.

The precise terms will depend on the Will and the family’s circumstances, so not every Property Protection Trust will operate in exactly the same way.

Why might someone consider a Property Protection Trust?

One of the main reasons is to provide some certainty about where a person’s share of their home will eventually go.

Take a couple called John and Sarah. Both have children from previous relationships and own their home together.

John wants Sarah to be able to stay in their home if he dies first, but he also wants his share of the property to eventually pass to his children.

If he simply leaves his share of the property to Sarah outright, it becomes part of Sarah’s estate. She could live for another 20 or 30 years, during which time her circumstances could change significantly.

She might remarry. She could make a different Will. Her relationships or financial circumstances might change.

None of this requires Sarah to deliberately exclude John’s children. It is simply a consequence of John having given away his interest in the property completely.

By using a Property Protection Trust instead, John’s share can be held under the terms of his Will while Sarah retains the benefit of living in the property. When the trust later comes to an end, John’s share can pass to the beneficiaries he selected.

Sideways disinheritance

This situation is sometimes described as sideways disinheritance.

It is particularly relevant to blended families and people who have remarried. Rather than an inheritance eventually passing down to children as originally intended, assets can move across into another relationship or family.

For example, someone may leave their entire estate to their spouse believing that their children will inherit everything after the spouse eventually dies. If the surviving spouse later remarries, however, the position can become considerably more complicated.

Marriage can also affect an existing Will, so relying on the surviving partner to eventually pass assets to particular beneficiaries does not provide the same certainty as making provision for them within your own Will.

This is not about distrusting a husband, wife or partner. Estate planning has to take account of the fact that circumstances can change considerably over a person’s lifetime.

How the property is owned matters

Before putting this type of planning in place, it is important to establish how the property is actually owned.

A couple can own their home as Joint Tenants or Tenants in Common.

With Joint Tenants, when one owner dies their interest in the property normally passes automatically to the surviving owner through the right of survivorship. This happens regardless of what the deceased person’s Will says.

A Property Protection Trust dealing with an individual’s share of a jointly owned home will therefore normally require the property to be held as Tenants in Common.

This means each person has a distinct share which can be dealt with under their Will.

Where a property is currently held as Joint Tenants, the joint tenancy can be severed so that the owners instead hold their respective shares as Tenants in Common.

It is worth checking the position rather than assuming you know how your home is owned, particularly if you bought it many years ago.

What happens to the surviving partner?

A Property Protection Trust does not necessarily mean the surviving partner has to leave the family home.

Quite the opposite. The trust will commonly be drafted so that the survivor can continue occupying the property, potentially for the rest of their life.

Depending on the terms, there may also be flexibility to sell the property and purchase another one.

This can be important later in life. A surviving spouse may eventually decide that the family home is too large, difficult to maintain or simply no longer suitable. The trust can be drafted with situations such as these in mind.

The survivor’s precise rights will depend on the wording of the Will and trust.

What happens to the deceased person’s share?

The deceased person’s share is held by the trustees in accordance with the terms set out in the Will.

The surviving spouse or partner may have a life interest which allows them to benefit from the property without receiving the deceased person’s share outright.

When that interest eventually comes to an end, the deceased person’s share can then pass to the beneficiaries named in the Will.

For a couple with children, for example, this might mean the surviving spouse can remain in the home for the rest of their life before the deceased person’s share passes to their children.

Are Property Protection Trusts just for blended families?

Blended families are one of the more obvious examples of where a Property Protection Trust might be considered, but they are certainly not the only one.

A couple with children together may have exactly the same objective. They want the survivor to be secure but would also like the first person’s share of the family home to be preserved for their children.

There may be other family circumstances where similar planning is appropriate.

This is why we prefer to start with what somebody wants to achieve rather than suggesting a particular type of Will or trust before understanding their circumstances.

What about care fees?

Property Protection Trusts are sometimes discussed in connection with care fees, and this is an area where it is important to distinguish between different types of trust.

A Will-based Property Protection Trust only takes effect after death. It cannot protect the person making the Will against the cost of their own care because, during their lifetime, they still own their share of the property.

Following the first person’s death, their share is held according to the terms of the trust rather than being transferred outright to the surviving spouse or partner. The survivor may have rights over that share without actually owning it themselves.

That distinction can be relevant if the survivor later requires residential care and their financial circumstances are assessed.

It would, however, be misleading to describe a Property Protection Trust as a guaranteed way of avoiding care fees.

There is also an important difference between a trust created through a Will and a lifetime trust where somebody transfers assets away while they are still alive. Lifetime arrangements can raise separate issues, including the rules concerning deliberate deprivation of assets.

Anyone considering transferring their home into a trust specifically because they have been told it will prevent them from having to pay towards future care should take appropriate advice before doing so.

Is a Property Protection Trust right for me?

Not necessarily.

There is no reason to make a Will more complicated than it needs to be, and plenty of couples are perfectly comfortable leaving their property outright to one another.

A Property Protection Trust becomes worth considering where you have two objectives that you would like your Will to achieve at the same time: providing security for the person who survives you and retaining some control over where your share of the property eventually goes.

This can be particularly important where there are children from previous relationships, although it is by no means limited to blended families.

The best place to start is with your own circumstances. Consider who you want to be able to live in your home after your death, what flexibility they might need and who you ultimately want to inherit your share.

Once those wishes are clear, you can look at whether a Property Protection Trust is an appropriate way of achieving them.

AHJ Wills & Estates helps individuals and families across Sheffield, Rotherham and the surrounding areas with Wills, trusts and wider estate planning.

If you would like to understand what would happen to your share of your home under your current arrangements, get in touch and we can talk through your options.