Back to BasicsEstate PlanningTrustsWillsBack to Basics – Property Protection Trust

25th September 2020Manisha Chauhan10

Property Protection Trusts (PPTs) are by far one of the most common types of trusts included in wills.

The PPT is designed to take the deceased’s share in the home and give someone else (known as the life tenant) a life interest in the property which will give them the protection of living in the property for the remainder of their lifetime or earlier if the trust specifies i.e. remarriage. It also ensures that if the survivor requires long term care, at least half the property is preserved for the benefit of their beneficiaries who are normally the deceased’s children.

These types of trusts are normally used for married couples or civil partners to ensure the share of the home will ultimately pass to the children at the end of the trust period whilst still ensuring the interests of the surviving spouse are protected.

For example, a married couple, who have not been married before want to leave their share of their house to their only child. 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 child but allowing the survivor to live in their share of the property for life or a specified period of time.


Joint Tenants or Tenants in Common?

Considering the point above with regards to severance, when considering a PPT, it is important to be able to distinguish the difference between tenants in common (TiC) and joint tenants (JT). The reason for this is that the property must be held as tenants in common to enter the trust.

What does this mean? To simplify, both TiC and JT refer to how a property is held or owned and this ‘ownership’ is registered with the Land Registry. Traditionally, when houses were purchased, the owners would have been registered as joint tenants. This would have meant that if one tenant died, the other tenant would have inherited the property by virtue of survivorship.

Holding the property as tenants in common means that each owner holds a share of the home which can be gifted via their Will. We would always advise the title is checked as there are occasions where clients may believe the home is held as tenants in common when, upon checking to verify this, the home is in fact held as joint tenants. Obtaining a copy of the title register is a small fee of £3.


When is it set up?

The trust would be set up on the death of the first testator. The legal title will then be transferred into the joint names of the surviving spouse (as an example) and the trustees.

It is important to add here that a property cannot enter a life interest trust on death as until the mortgage has been settled, they are not seen to own the property. The simpler solution would be to ensure that both clients have life cover in place to cover the mortgage on first death. If on death there is still a mortgage on the property and there is nothing in place, the survivor does still have limited options:

  1. They can sell and downsize as the PPT has downsizing provisions; or
  2. A cash loan could be taken out to settle the mortgage.


What is the point of a PPT?

The main reason for a PPT is the protection it provides for the beneficiaries i.e. the children, to ensure they are protected and ultimately receive a share of the home.

If the share of the home is simply gifted to the partner directly, this could cause a number of issues – the main one being sideways disinheritance i.e. the surviving partner remarries and the house passes to their new spouse under the Will. A PPT will enable the partner to stay in the home and will avoid the risk of the partner potentially disinheriting the children.

Likewise, if a share of the home is gifted to the children directly while the spouse or partner has the other share, this could cause issues in that the children may want to force step mum out of the property or insist that she pays rent to remain in the property. A PPT prevents this from occurring and essentially protects both parties’ interest. It is important to add the beneficiaries will only own the share of the home when the PPT ends either due to the death of the life tenant or earlier.


Can the property be sold?

A PPT can include powers allowing the life tenant to downsize and use the sale proceeds to purchase a substitute property for the life tenant to live in. The additional proceeds from the sale will remain in the trust and the life tenant can be paid an income from this. This can be useful where the life tenant may not be able to look after a large home as they grow older.


Can the life tenant end the trust sooner?

If the life tenant (Mr) decides to revoke his life interest, he would simply inform the trustees that he wants the life interest to end and the share of the home will be distributed to the beneficiaries. However, if the life tenant also owns a share of the property, this does mean there is a risk that the children, now owning a share of the property, could attempt to force a sale of the property.

If the life tenant decides to revoke their life interest, as it will be earlier than death, the distribution to the beneficiaries will be classed as a Potentially Exempt Transfer (PET) from his estate and therefore he will need to survive the 7 year period for it to not form part of his estate for IHT purposes.

Disadvantages of a PPT

The main disadvantage of a PPT is that this inherently comes with a loss of control over the property for the survivor, since they’d be limited in how they manage the property e.g. would need the trustees agreement to sell, would be unable to take out equity release if needed.

Probate would be required and there would be fees associated with setting the trust up and transferring the property to the trust. Probate is unlikely to be avoided completely unless all the assets are held jointly.

There is also the future IHT liability that this creates since assets in the PPT would be treated as part of the life tenant’s estate for IHT purposes. If they had directly inherited the property, at least they could have had the opportunity to carry out some lifetime planning to reduce this.


How is a PPT taxed?

Inheritance Tax 

For inheritance tax (IHT) purposes, the life tenant of the trust is treated as inheriting the trust property on the death of the testator. If the life tenant is the deceased’s surviving spouse or civil partner the spousal exemption will apply and delay any IHT until the life tenant’s death.

When the life tenant dies, everything in the PPT will be revalued and included in their estate for IHT purposes.

Where PPT’s are used between married couples or civil partners, the RNRB will apply if the share of the home passes directly to their direct descendants i.e. children.

Where there are unmarried couples it would be easier to explain using the example below:

Fred and Elsie own a property as tenants in common. They are not married. Fred has 2 children from an earlier marriage. If Fred includes a PPT in his will giving Elsie a life interest in the property until her death and names his children as the beneficiaries at the end of the trust, the RNRB will not apply. The reason for this is because the interest is seen as passing to Elsie and would therefore need to pass to her direct descendants for the RNRB to apply. If, however, Fred and Elsie get married, the RNRB will apply as stepchildren are classed as direct descendants.

Capital Gains Tax

There is no capital gains tax (CGT) payable on the testator’s death. The trustees will acquire the testator’s share in the property at the value at the time of death. There will be no CGT payable on the life tenant’s death.

CGT would need to be considered in the event the property is sold between the testator’s death and the life tenant’s death.

If a PPT covers the main residence, this will allow the private residence relief for CGT to apply and ensure that no CGT will be payable if the property is sold, e.g. to downsize.

Income Tax

Where the property is the life tenant’s main residence, the trust will not be creating any income. However, if the property is rented, cash is released due to downsizing or if the property is not the life tenant’s main residence, the trust will produce an income which will need to be taxed.

The life tenant is entitled to all income of the trust and is generally taxed on the basis that it belongs to the life tenant. However, this will depend on whether the trustees receive the income and then pay it to the life tenant or whether the trustees mandate the income so that the life tenant receives it directly. If the trustees mandate the income, it will be the responsibility of the life tenant to declare and pay the income tax due.


Manisha Chauhan

Manisha joined the Technical Advice Team in July 2019 having previously worked as an Employment Solicitor in Warwickshire before relocating to Lincolnshire. Manisha provides advice on technical queries daily and works alongside Siobhan Smith also providing ongoing support on Sure Will Writer.


  • [email protected]

    21st October 2020 at 10:02 am

    Hi Manisha

    Interesting article and we do advise on these.

    however, one thing that has never been made clear to me is what happens when one of them dies.

    What is the legal mprocess that has to be followed?

    If the deceased only has their share of the property, what needs to be done to setup the trust and inform land registry.

    As an estate planner I think its important to make the client aware of the process when setting these schemes up.


    Brian Brotherton
    Estate Planner


    • Manisha Chauhan

      28th October 2020 at 9:14 am

      Hi Brian,

      On first death the 50% share of the deceased’s property will need to be passed to the trustees to hold on trust for the beneficiaries. The life tenant will have the right to reside in the property for life.

      After probate has been granted and the estate is ready to be administered, the deceased’s share of the property will need to be dealt with in the following order: –

      • Trustees will be required to hold a meeting to accept their office as trustees and confirm that they are happy to hold the property on trust.
      • Minutes will be drafted for the trustees to sign
      • A Declaration of Trust will need to be drafted between the surviving spouse and the trustees. The will becomes the basis of this declaration of trust, as it contains all of the required trust wording.
      • The property will then need to be transferred with the Land Registry into the names of the trustees using form TR1 – the Land Registry Title will then have a restriction placed against it which will refer to the Declaration of Trust

      I’m afraid for more detailed information you will need to speak to your probate provider as we don’t advise on probate matters.


  • Wayne Fleming

    17th June 2021 at 7:46 am

    Hi Manisha

    What is the “best” position in leaving a property where the owners are siblings owning the property as tenants in common.
    Each sibling has their own children that they wish to inherit their share of the property, whilst still “offering protection” for the surviving sibling on first death. to be able to continue living in the property.

    Wayne Fleming


    • Manisha Chauhan

      17th June 2021 at 1:45 pm

      Hi Wayne,

      As the surviving sibling owns a share of the home, they have the right to live in the property anyway.

      If they want them to continue to live in the property uninterrupted, a PPT would be advisable here as it would give the life tenant the only person with an interest in the property during their lifetime, avoiding the remaindermen (i.e. children) being able to force a sale.

      If there was no PPT trust and the children were gifted a share of the home which was owned alongside surviving sibling, they could force a sale of the property.


  • Rosh Parmar

    1st July 2021 at 9:10 pm

    Hi Manisha – great article. I have a specific query regarding a PPT and how it would operate in practice.
    The example we have is:
    Within the PPT, upon the death of the first life, the surviving spouse’s share of the property will be 50% and the children will get the remaining 50% in trust.
    What if the surviving spouse wanted to move house. For example, the children are still really young and the spouse wanted to move home to be closer to preferred schools. How would this happen in practice? Who’s name would have to go on the mortgage of the new house, if using the full proceeds from the sale of the original house (if that is even allowed)?

    For example, say the house is sold for £500k. Upon the sale of the house, will the spouse be able to use all of this £500k for the onward purchase? Or would £250k have to be set aside for the children in trust, and the spouse therefore only have access to £250k for the onward purchase?


    • Manisha Chauhan

      13th July 2021 at 10:24 am

      Hi Rosh,

      Thank you for your message.

      With regards to your query, the PPT would contain specific downsizing provisions which would allow the life tenant to move and the new home would be held on the same terms as the trust. The life tenant would inform the trustees who would need to agree to an alternative home being bought.

      If the surviving spouse wishes to move, the trustees can sell the property. The trustees can use their share of the proceeds towards a new property for the surviving spouse and will continue to hold a share in the property. Any of the trust’s share that is not used towards the purchase of the new property will continue to be held in trust. For example, if the trust and the survivor own a £200,000 property 50:50 and the survivor wishes to downsize to a property worth £100,000. Assuming they purchase the new property in equal shares too, the trust would own 50% of the new property (and £50,000 which they will invest to create an income) and the survivor will own 50% of the property (and £50,000 in cash).

      Where a property is held for example 50:50; the property will always remain as that, in shares, so the share which is held by the trust passes to the children along with any surplus cash which has been invested from the downsize. The life tenants own share of the property which they hold in their name along with any cash made from the downsize (their 50% of the excess sale proceeds), upon their death forms part of their estate and passes either by the terms of their own Will of via intestacy.


  • David Bayliss

    13th July 2021 at 4:18 pm

    What is the key difference between a Property Protective Trust (PPT) and Flexible Life Interest Trust (FLIT) ?
    Why would I recommend one over the other ?


    • Manisha Chauhan

      13th July 2021 at 5:15 pm

      Hi David,

      In short, a PPT is a life interest over the property only.

      A FLIT gives the life tenant, normally the surviving spouse or civil partner, a life interest over the residue and also allows them to benefit from capital at the trustees discretion. The FLIT also allows other beneficiaries to benefit from capital during the life tenant’s lifetime. On their death, the trust carries on as a discretionary trust so can continue to protect assets after second death. Both trusts provide protection from care fees and also sideways disinheritance

      We have set out links to our articles below which discusses the trusts in more detail.


  • Yvonne Joy Gutteridge

    20th August 2021 at 6:35 pm

    Hope you can help with my query.
    I am a trustee of a PPT together with my mother who is also a trustee and surviving spouse.
    I have Power of Attorney over her finances which I now have too use due to her ill health. She has recently gone into full time care home in which she pays the full costs.
    Firstly, do I have to add another trustee? (I can add my brother if it is necessary). I am reluctant to do this as he has not taken any interest in Mums welfare for quite some time and most certainly since her illness has taken hold.
    Secondly, at some point I may have to sell Mums home to help to pay future care home fee’s. Will I be able to do this as a sole trustee.


    • Manisha Chauhan

      5th September 2021 at 9:51 pm

      Hi Yvonne,

      As your mum still has capacity, she can still remain a trustee. If she is wanting to step down then although the trust can still continue, as there are 2 trustees required for land and property, a second trustee would need to be appointed unless the Will has a substitute trustee appointment which will take effect depending on the wording of the clause. A solicitor will need to draw up a deed of appointment for a second trustee to be appointed.

      A second trustee would be required to sell the home. However, appointing a second trustee to act just for the sale of the property is a fairly straightforward process and something a conveyancer will be able to advise you on.


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