Property Protection Trust

What is a Property Protection Trust?

A property protection trust (PPT) is best suited to couples that are married or in a civil partnership who want to ensure that their respective shares will be passed to their children when they die.

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For example, a married couple, who have not been married before want to leave their share of their house to their two children. They currently own the house as joint tenants. Their estate planning consultant would sever the tenancy on the property registering them each as 50% owners. They then have their Wills written to represent that if one died their half of the property would be held on trust for the benefit of their children but allowing the survivor to live in their share of the property for life or a specified period of time.

When is it set up?

As it is a Will based trust it is not set up until the death of the first testator (the person who’s Will it is). Their half of the property would be transferred into the trustees (person or persons who will look after the share) name and would be held until the second testator died i.e. it is set up on the passing of the first spouse/civil partner to protect that share for the benefit of a specified beneficiary/beneficiaries and then once the second spouse has passed away the property can be distributed.

Then what happens?

On the death of the second testator the property would then pass to their children and they would own the property equally as tenants in common. If, for example, there was an outstanding mortgage, or the property was to be sold then they would share equally any equity/capital and any income generated by the trust property.

You may ask what is the point!

  • As the couple are married and have children, they may think that the property would pass automatically if something happened to them. If they were the registered parents of the children then this is correct, but a PPT will guarantee the protection of the share of the asset for the beneficiaries. Without it, circumstances could arise whereby after one spouse dies the other remarries and then the children could be disinherited because the house will have passed by survivorship. This will then subsequently pass to the new spouse if the testator died and possibly onto their own children or relatives.

  • If the possibility of a long-term care requirement in the future is a concern a PPT can ensure that the children receive at least half of the value of the house upon death i.e. By setting the trust up on first passing means that the deceases share goes into the trust rather than what would happen if the couple had a Mirror Will in place. As the trust is seen as owning it remaining spouse would still on paper only hold half a house thus protecting that part of the asset for future generations.