24 Apr A short guide to property trusts
With thousands of people being forced to sell their properties every year in order to pay escalating nursing home costs, it’s important to ensure your Will is designed to protect as much of your wealth as possible if you too should become ill later in life.
Many of my clients decide to place their largest asset – their home – into a property trust to eliminate third party intervention and make sure that a certain percentage of the property’s value can be passed down to their children or grandchildren in the future.
Here, I have put together a short guide to property trusts that explains the key benefits of using such a vehicle to ring-fence some of the value of your home.
The purpose of a trust
A trust can be used to place the property or assets of a certain individual (the Settlor) into the care of somebody else (the Trustee).
The Trustee could be a friend, a family member or even a solicitor. It’s completely up to the Settlor who they choose to look after their assets – but the key thing is, doing so takes these assets out of the Settlor’s estate and places them into the care of another.
This usually means that the Beneficiary of the Will – the person or persons who will end up receiving the assets upon the death of the Settlor – will not be eligible to pay inheritance tax on them.
How do property trusts differ from other arrangements?
As the name suggests, a property trust deals solely with the matters of ownership relating to the home that is owned by the Settlor.
I’m worried about long term care fees – should I place my home into a property trust?
This specific type of legal arrangement is designed to outline what will happen to a home if one of the joint owners passes away. However, it can also be used to prevent part of an estate being taken away by the local authority if a surviving partner needs to pay for long term care.
Imagine you and your partner have been married for over 30 years. You have one child, and you jointly own your property.
According to law, if one of you dies, then the property will be passed straight over to the surviving partner. This looks fantastic on paper – but if the surviving spouse becomes unable to live on their own, and needs to be assessed for residential care home fees, the value of the whole of the property will be taken into consideration for the application.
Because they will technically have more to their name, they may receive less financial support from the government than if they had placed the property into a trust.
Transferring the property into a trust would ensure that half of the home would be owned by the surviving partner, and half of it would be owned by the trust. The government will only be able to consider the share that remains in the surviving partner’s name.
In addition to this, the share held in the property trust would remain untouched and would retain its value – meaning the Beneficiaries will inherit more when the surviving partner eventually passes away, too.
Is a property trust the best option for me and my family?
As you may already know, a property trust is just one type of arrangement that can be used to help you manage your estate and protect your assets. It may not be the best choice of trust for you and your partner if your estate is particularly large, or your legacy is particularly complicated.
The best way to find out if a property trust will be suitable for your situation is to contact me, Sacha Tiller, for a free, no-obligation chat. I offer convenient home consultations to those who live within a 25 mile radius of Colchester, and charge affordable fixed fees for consultations outside of this area.