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Will Writing: Is a Protective Property Will Trust good enough for your needs?
Many couples put a Protective Property Trust (PPT) into their Wills, but they might be missing out on a lot of additional benefits by not using an Asset Preservation Trust (APT) instead.
What is a Protective Property Trust?
Many couples have a Protective Property Trust (PPT) added to their Mirror Wills when they are written to ensure that half of the house goes into trust on first death (when the house is owned by two people), and then the whole property goes to the intended beneficiaries on second death.
There are lots of benefits of doing this. Mostly this avoids to an extent, sideways disinheritance, or a diminished inheritance if the surviving spouse remarries, changes their Will, or fritters the money away. It can also protect half the house against assessment for care home fees after the first death too.
The Protective Property Trust has limitations which can be addressed using another kind of trust
If the survivor decides to downsize, they can usually do so (check the wording if you have a trust already), however the property trust is unlikely to allow all the capital released from the sale, to be released from the trust for either the survivor or the beneficiaries. This might cause problems in the future if money is required for example, for children’s education or for the deposit on a house for a beneficiary. It might need to be used to sustain the survivors standard of living.
Usually after the second death, the trust is wound down and automatically goes to the intended beneficiaries, but this has limitations which might have serious consequences, for example if one or more of the beneficiaries has financial problems, is going through a divorce, has addiction problems or may be a minor.
What is an Asset Preservation Trust (APT)?
The Asset Preservation Trust (APT) has the protective benefits of the Protective Property Trust (PPT) but many additional benefits too. This is also a Will Trust which is enacted on the first death of a couple, or joint property owners. Half of the property (or a defined different amount) goes into the trust, and this is protected against sideways disinheritance, and assessment for care home fees.
You can also add savings and investments to the Asset Preservation Trust and this capital can be given or loaned out to the survivor or beneficiaries. The loan facility is a great way to use assets of the trust to help those that need it, without losing any of the protections afforded to these assets.
Another benefit of the APT is that the property in the trust can be rented out, and income can be taken from the trust for the survivor or end beneficiaries too. For any cash in the trust (as you can put cash in the trust on first death too, or it might arise from sale proceeds), income can be taken for the benefit of the survivor, and cash can be loaned or gifted to the survivor or beneficiaries too.
On second death, cash and property can be kept in the trust until it is safe and proper to give it out to the beneficiaries. Perfect if any are going through a divorce, bankruptcy, have creditors, are struggling with addiction, or are reliant on state support.
Because you don't know what is around the corner...
Property and money can remain in the trust for up to 125 years, which means it can protect against inheritance tax, sideways disinheritance, care home fees and more for four or five future generations, without having to continually set up new trusts by new owners as the assets pass through different generations and estates.
Having a Protective Property Trust (PPT) in your Will compared to a Asset Protection Trust (APT) is a bit like comparing a letter opener to a Swiss Army Knife – a letter opener is a very useful tool, but nowhere near as flexible or dynamic as a Swiss Army Knife for meeting changing needs and requirements over time.
How we can help (and keep it simple for you too)
If you already have a Protective Property Trust in your Will (or similar as different firms call them different names, and they all tend to operate differently but similar) then I will be happy to talk you through the differences, and what is most likely to be most suitable for you given your circumstances.
If you don’t have any trusts in your will, and you own property, have other assets you wish to protect, or if you need to make a Will, I can offer a free no obligation initial consultation, and should you decide to proceed, a competitively priced Will Writing and Estate Planning service. Please give me a call on 01507 707123 or send me an email at email@example.com . I look forward to assisting you in these matters.