A property protection trust will is a will designed to help protect your property from an assessment to long term care fees. The half share of the family home belonging to the first person to die, passes into the trust. This type of trust is also known as a life interest trust in favour of the survivor which means that they can benefit from the share of the house in the trust during his/her lifetime and on their death the trust fund passes to others, usually children of the family.
Mr and Mrs Jones own their house in joint names and have other joint savings. Mr & Mrs Jones want to ensure that their respective half shares of the house ultimately pass to their children whilst ensuring the survivor has the protection of living in the property for the remainder of their lifetime. They also want to ensure that if the survivor of them requires long term care, at least half the property is preserved for the benefit of their children.
If Mr Jones dies first he leaves his half share of the property into a property protection trust, with the remainder of his estate left to his wife. Mrs Jones has a right to occupy Mr Jones’s half share of the property together with the ability to move house. If Mrs Jones requires long term care Mr Jones’s half share of the property is retained in the property protection trust and cannot be assessed as capital available to pay Mrs Jones’s care fees. Even if Mr and Mrs Jones’s children are made bankrupt, become divorced or predecease Mrs Jones, her occupation is secured. On Mrs Jones’s death, the property protection trust comes to an end and the half share of the house transferred (or the sale proceeds paid) to the children free from any Capital Gains Tax.
Should the survivor then need care the following situation is created:
1) The value of the share of the home of the first spouse to die belongs to the trust and therefore cannot be assessed by the Local Authority.
2) The Local Authority has to assess the open market value of the share of the home of the surviving spouse needing care. If the home is not sold (perhaps it can be rented out) it is possible to argue that the value of their share of the home is negligible or even much less than 50% of the whole because it is only part of a property– since few people are going to buy half a house!
This scheme can only be instigated by a couple while both of them are alive and have the mental capacity to make Wills. As soon as one of them has died, this scheme ceases to be an option, so act soon!