Protective Property Trusts in Wills

Protective Property Trusts in Wills

Are you worried about where your money goes after you die? Common questions people ask when they are making their Will are:

What happens if my spouse remarries after I die?  The new spouse could inherit my assets.  This can be because the surviving spouse writes a new Will benefiting the new partner, or fails to make a new Will after re-marrying (when the old will becomes invalid) and their estate passes to their new spouse under intestacy rules.

What can I do to ensure this doesn’t happen and my ultimate beneficiaries are my children or my chosen beneficiaries?

What about care home fees?  If I leave everything to my spouse and they go into care after I die, the local authority won’t step in to help with the cost until most of our assets have been depleted.  Is there anything I can do to ensure at least part of the estate is ring-fenced to pass to our children, or other beneficiaries chosen by me?

I have read that state assistance towards care home fees will become much more generous in the future. Has the problem gone away?

Wills with Protective Property Trusts can help greatly.  But first let’s have a look at the government’s proposals on care home fees:

CARE HOME FEES – HAS THE PROBLEM GONE AWAY?

The Cap

It sounds like good news – from 2016, if the relevant legislation is passed care home costs paid by an individual will be capped at £72,000.  Does that mean that when someone has paid £72,000 the local authority steps in and pays the bills?  Unfortunately, the answer is no!

The cap works as follows: Each client has an individual “care account”. This is not what the individual actually spends, but what the local authority thinks they should spend.  Nearly always there will be a shortfall.  More importantly the cap only relates to the “care” element of the fees, not the “hotel” (ie board and lodgings) element.

On some calculations it would take about 5 years in care before an individual will reach the cap – and few people are likely to stay in care that long.

Tariff income

At the moment the local authority only starts to pay for care home fees when an individual’s capital is £23,250 or less.  It is then on a downward sliding scale to capital of £14,250, but the individual’s contribution is then only £36 per week.

In future the local authority will start to contribute when the capital is reduced to £118,000.  There will be a sliding scale of payments when the capital is between £17,500 and £118,000, but the individual’s contribution will be £402 per week.  Quite a lot more than £36!

So in other words, the proposed new financial limits sound great but they aren’t really.

Will the government be much stricter stopping people avoiding care home fees?

Yes they will be.  It is proposed that from 2016 if someone has transferred assets into a trust with the intention of avoiding care home fees, the local authority can recover the fees from the trustees of the trust.  There are similar rules already in place but they will become more draconian.

Is there still a role for the Protective Property Trust?

Yes, but the purpose cannot be to avoid care home fees.  It must be (for example) to guarantee that your assets go to your children, and not to your spouse’s new husband/wife and their children.

How do Protective Property Trusts work?

Usually couples want to leave their assets other than their house directly to their spouse.  The survivor will need the liquid assets to pay for normal living expenses.  However the cash tied up in the house can be protected for the next generation without any hardship to the survivor.

The couple normally have to change the way they hold the house. Typically they are “joint tenants” which means the whole house passes directly to the survivor when one dies. They change this to holding as “Tenants in Common”, which means they each own a fixed 50% share of the property. Then they write Wills containing a Protective Property Trust. When the first spouse dies his or her 50% share of the property is held on trust for the children. In the meantime the survivor is entitled to stay in the property as a life tenant, has security and can even move house if they want to.

This means that there is a guarantee the children will inherit at least 50% of the value of the property, which can’t be left to anyone else or, incidentally, used to pay for care home fees.

Protective Property Trust Wills must be written while couples are both still alive and in good mental health.

How do I make a Will containing a Protective Property Trust?

You can instruct Purely Probate to do it for you.  We will give you a fixed quote in advance.  We can take your instructions in person or over the phone.

However when we take your instructions, we will need to speak to both the husband and the wife and satisfy ourselves that they both fully understand and agree with making Protective Property Trust Wills.