Common Questions in our Inbox: Property Protection Trusts

1st June 2023Manisha Chauhan7
https://i0.wp.com/www.willwriters.com/wp-content/uploads/2023/06/common-questions-ppt.jpg?fit=1200%2C644&ssl=1

Welcome to the second in a new series of articles from the SWW Technical Team; Common Questions in our Inbox. For this instalment let’s talk about one of the common will trusts – the property protection trust (PPT).

A 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.

Can a life tenant be someone other than the spouse?

Yes. A life tenant can be anyone you want to provide the life interest for. If the life tenant is a spouse or civil partner, the interest will pass to the trust free from inheritance tax (IHT) due to the spousal exemption.

If the life tenant is someone other than the spouse, IHT may be payable.

Can the trustee of a PPT be a life tenant?

Yes. However, we would advise one other trustee be appointed who is neutral to avoid a conflict of interest.

Can you have more than one life tenant?

Yes. You can have more than one life tenant of a trust. The point we would add is that each life tenant is treated for IHT purposes as having an equal share of the trust fund. On each life tenant’s death, their “share” is treated as part of their estate and passing equally to the surviving life tenants. On the last surviving life tenant’s death, the whole property would be valued and included in the life tenant’s estate for IHT purposes.

If a home is owned as joint tenants, can a share of the home be placed in trust?

If the homeowners own the home and each want to grant the other a life interest, the home would need to be held as tenants in common before it can enter this trust. In order to achieve this, a notice of severance would need to be completed and a SEV form sent to the land registry which will place a restriction on the title register.

The title register should always be checked before this trust is drafted in the Will.

Can a property that belongs to a company be placed in a PPT?

I am afraid not. If the property is owned by the company and not by the individual personally, then the property cannot be dealt with separately from the other company assets.

Can a property that is subject to equity release enter into a PPT?

Whilst we are not experts in this area, the general position is that a property that is subject to equity release cannot usually be placed into a PPT on death as a mortgage or charge on a property needs to be paid off before the asset can enter the trust.  That’s not to say it’s impossible, but you would need specialist advice in this area. Therefore it is best to enquire with the equity release lender and seek confirmation from them in writing.

Can putting a property in a PPT be considered deliberate deprivation of assets?

Not currently. Deliberate deprivation would only apply for lifetime trusts and not will based trusts since the trust is normally created on first death and therefore there would be no deprivation. Deliberate deprivation only applies where a person gifts assets in their lifetime with the intention of avoiding those assets being used for their own care. It does not apply if a person gifts their assets into a trust on death or in any way to avoid those assets being used to pay towards another person’s care.

Have a question of your own for the SWW Technical Team*? Send it to us at [email protected] and where possible, we’ll advise.

 

*Technical advice is available only to full members of the SWW (MSWW^) and is provided by email only. For more information about accessing our technical advice service, please see here.

Manisha Chauhan

Manisha joined the Society’s 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 for Society Members and ongoing support on our professional drafting software, Sure Will Writer.

7 comments

  • Steve Blofield

    2nd June 2023 at 9:14 am

    As always excellent information from the technical team and I have nothing but praise for them I have found them to be swift and accurate and explain things in simple language whenever a question is raised with them and I would encourage all four members to use their services.

    Steve blofield

    Regional chair

    Reply

    • Manisha Chauhan

      2nd June 2023 at 10:08 am

      That’s very kind of you to say. Thank you Steve

      Reply

  • Stephen Hall

    6th June 2023 at 11:33 am

    Excellent article again from the Technical Team. It’s always a good thing to read up on these articles to refresh/educate ourselves in these topics.

    well done team.

    Reply

  • keith brisley

    9th June 2024 at 9:25 am

    Kindly advise, we are tenants in common and have PPT wills – does this also protect the property from IHT, on second death

    Reply

    • Manisha Chauhan

      26th June 2024 at 11:40 am

      Hi Keith, if you are married or in a civil partnership and your spouse/civil partner is the life tenant of the PPT, on first death the deceased’s share in the property passes to the PPT free from IHT. On the life tenant’s death, the share in the trust will form part of the life tenant’s estate for IHT purposes. In terms of protection from IHT on second death, the PPT doesn’t do this as the trust ends on second death or earlier depending on how the trust period is drafted

      Reply

  • Ken Graham

    1st July 2024 at 12:34 pm

    Hi Can we include BTL properties in a PPT

    Reply

    • Manisha Chauhan

      1st July 2024 at 12:52 pm

      Hi Ken, yes you can include buy to let properties in a PPT

      Reply

Leave a Reply

Your email address will not be published. Required fields are marked *

About The Society of Will Writers

The Society of Will Writers is a non-profit making self-regulatory organisation whose primary objectives are the advancement, education and ethical standards within the will writing profession.

Contact Us

The Society of Will Writers
Chancery House
Whisby Way
Lincoln
LN6 3LQ

what3words: ///ever.embellish.hissing

Tel: 01522 687888
E-mail: [email protected]

SWW, logo, white, crest, seal, will, pen, quill, ink, paper, book, scales, legal, blue, gold,

Copyright by The Society of Will Writers. All rights reserved.
Registered in England and Wales. Company Number: 02918900.

Login

Register

If you have not been registered for the SWW members Area, please contact us. Your personal data will only be used for the purposes described in our privacy policy.

Already have account?

Lost Password

Please enter your username or email address. You will receive a link to create a new password via email.