Expat Financial Advice: What is a Property Trust Will?

A property trust will (also known as a property protection trust, an asset protection trust, a family protection trust or a property preservation trust) keeps your home safe for your loved ones after you die. 

It does this by placing your share of the property in a trust, so that the people you want to benefit from it can – but without owning it.

With a property trust will, your spouse can still live in the home you share after your death. 

However, because they won’t own your half of the property, it:

  • Is kept safe for your children, even if your partner remarries, changes their will or has children from another relationship.
  • Is left to the people you want: it can’t be taken by creditors or given away in divorce settlements.
  • Will be left out of care home fee assessments, if your spouse one day needs care.

In short, it protects both your spouse’s security and  your children’s inheritance.

How does a property trust will work?

The half share of the family home belonging to the first person to die passes into the trust. 

This type of trust is 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. 

On their death, the trust fund passes to your children. 

Why use a property trust will?

Remarriage or complex family arrangements.

61% of men and 19% of women remarry after the death of their husband or wife.

If your spouse remarries after your death or, if either or both of you have children from a previous marriage, then there could be unforeseen consequences when your estate is distributed on your death.

If you leave your estate on your death to your spouse outright and they remarry after your death without making other provisions, all of your estate, together with your spouse’s, could pass to their new spouse. 

Your children, for example, would not be relatives of the new spouse or partner and your estate could pass outside the family to someone you have never even met.

A property trust will can ensure your assets are protected and pass to the people you have specified.

If you have children from a previous relationship, it is likely that you will want to make some provision for both your new spouse and your children. 

However, if you leave all of your estate to your spouse outright, then your assets could pass ultimately to their children rather than your own.

By having a property trust will, you can make provision for your new spouse for their lifetime, whilst also ensuring your assets ultimately pass to your children on your spouse’s death.

Bankruptcy/financial difficulty

If your children get into debt, the trust means their creditors can’t force the sale of the family home. 

While orders for sale of jointly owned properties aren’t common, if they can’t pay a debt any other way it is a possibility. 

The trust keeps the house out of the creditors hands while your spouse is living there.

Divorce

If your children get divorced, the home would be kept out of any settlement. 

We cannot predict what will happen in someone else’s relationship and inherited properties are not automatically excluded from the assets to be divided on divorce.

The trust ensures that your spouse is able to continue living in the family home in such a scenario.

Long-term care

With people living longer, more and more of us potentially require residential or nursing care in our later years. 

Property trust wills can help to protect a share in the property from the effects of care fees which are currently averaging £30,000 per annum in the UK.

In England, someone will usually be expected to pay for this care themselves in the first instance. 

It is only when their capital has reduced to £23,250 that the Local Authority is obliged to assist. 

Even then, the Local Authority will only make a partial contribution towards the fees, until the capital falls to £14,250. 

Whilst it is, of course, possible that both spouses will need care at some point, it is more likely that the survivor may go on to need care after their spouse has died. 

If the first one to die leaves their estate to their surviving spouse or partner outright, and the survivor subsequently requires care, then all of their assets will be taken into account, and potentially used to fund the costs of care.

If we use a property trust will, can the survivor move or will they have to stay in the same property?

The family home can be sold, and an alternative property purchased. 

If the property which is purchased costs less than the original property, any profit would need to be shared equally between the surviving spouse and the trustees. 

Summary

Rather than leaving your share of your property (and any of your other assets if required) outright to your spouse survivor on your death, a property trust will allows them to benefit from your share of your property (or other assets) without actually owning them. 

This ensures your assets pass to your chosen beneficiaries on their death.

Related articles

What is a spousal bypass trust and who should use one?

Expat guide to UK inheritance tax

How does UK inheritance tax work when a spouse is non-domiciled?

Talk about it?

If you would like to understand more about this topic, get in touch. Email contact@rossnaylor.com.


Ross Naylor Poland

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Ross Naylor Financial Adviser

About Ross

▪️Ross has been a financial adviser for the past 26 years.

▪️He specialises in working with British expats over age 50 who are looking to optimise their finances for retirement.

▪️He is qualified as a financial adviser both in the UK, as a Chartered Financial Planner®, and in the EU, as a European Financial Planner®.

▪️Ross has been an expat himself for 22 years and currently lives in Warsaw, Poland with his wife and 2 children.