Protecting Your Property and Loved Ones: The Benefits of a Protective Property Trust and Tenants in Common Ownership
When it comes to estate planning, one of the most important — and often overlooked — considerations is how to safeguard your most valuable assets for the benefit of your loved ones. For homeowners, the family home is typically the largest asset, and ensuring it’s passed on efficiently and securely is vital.
A smart strategy that combines Protective Property Trusts within your will and Tenants in Common property ownership can offer significant protection against potential risks such as care home fees, remarriage, and inheritance tax complications. In this post, we’ll explain how these work together and why you might want to consider them as part of your estate planning.
What is a Protective Property Trust?
A Protective Property Trust (PPT) is a type of trust created in your will that allows you to leave your share of a property to your chosen beneficiaries (typically your children or other relatives) while giving a surviving spouse or partner the legal right to live in the property for the rest of their life or a specified period.
Upon the death of the surviving spouse or partner, the property share passes directly to the beneficiaries, rather than forming part of the surviving partner’s estate.
What is Tenants in Common Ownership?
When two or more people own a property, they can do so either as:
Joint Tenants: where both parties jointly own the whole property, and on the death of one, their share automatically passes to the surviving owner.
Tenants in Common: where each person owns a specified share of the property (e.g. 50% each), and on death, their share passes according to the instructions in their will, not automatically to the other owner.
If your house has more than one owner then to use a Protective Property Trust, you must hold the property as Tenants in Common.
The Benefits of Combining a Protective Property Trust and Tenants in Common Ownership
1 Protect Against Care Home Fees
If your surviving spouse or partner later needs residential care, their financial assessment for care fees will only include their share of the property — not the deceased’s. The deceased’s share is held in trust and is therefore not considered part of the surviving partner’s assets, potentially preserving half the value of the property for your children or other beneficiaries.
2 Safeguard Against Remarriage and Disinheritance
If your partner remarries after your death, any jointly owned property could ultimately pass to the new spouse, disinheriting your children. With a Protective Property Trust, your share of the property is ring-fenced for your chosen beneficiaries, regardless of any future marriages or relationship changes.
3 Preserve Your Legacy for Your Children
This arrangement ensures your children or beneficiaries eventually inherit your share of the property, while still providing security for your surviving spouse or partner. It strikes a balance between protecting your family home and providing for your loved ones in your absence.
4 Flexibility for the Surviving Occupant
A Protective Property Trust can be tailored to allow the surviving partner to remain in the property for life, or until they remarry, enter long-term care, or choose to move. Some trusts also allow the property to be sold and the survivor to downsize, with the trust’s value following the proceeds.
5 Potential Inheritance Tax Advantages
While Protective Property Trusts primarily offer asset protection, in some cases, they can also assist in inheritance tax planning by controlling how and when assets are passed down. However, careful planning is needed to ensure this is effective within current tax rules.
How to Set It Up
To implement this strategy:
1. Change Property Ownership to Tenants in Common
If your property is currently held as joint tenants (Joint owners), you’ll need to sever the joint tenancy and register it as tenants in common. This is done by signing a declaration and the relevant Land Registry form, both of which we can prepare for you by clicking on our Tenants in Common Form.
2. Make or Update Your Wills
You and your partner should each have wills that include a Protective Property Trust, specifying who will benefit from your share of the property and under what terms. We have an online form for this too here.
3. Get Specialist Legal Advice
As this involves valuable assets, it’s essential to seek professional advice from an estate planning company such as us to ensure everything is set up correctly and aligned with your broader estate planning goals.
Final Thoughts
A Protective Property Trust combined with Tenants in Common ownership is a thoughtful and effective estate planning tool. It helps shield your property from care fees, protects your family’s inheritance, and offers peace of mind that your wishes will be respected, even in life’s unpredictable circumstances.
While it may not be suitable for everyone, it’s a strategy worth considering if you own property with a partner and want to balance providing for your loved ones with preserving your estate for future generations.
Need help putting this in place?
Contact us to consult with a qualified estate planning adviser to explore whether a Protective Property Trust and Tenants in Common ownership could work for your personal circumstances.