For many families, the most valuable asset they own is their home. Most parents expect that their children will in the future receive this as part of their inheritance and that this will be available to them even if there is little left in savings. The reality is that there are a number of reasons why this may not be the case particularly once the home has passed solely in the name of the surviving spouse. If leaving a legacy for your children is of concern to you then looking at how a Protective Property Trust may help is definitely worth considering.
To explain this, let’s use an example. Mr and Mrs Smith own their home. They have made Wills leaving everything to each other in the first instance and then everything to their children, John and Sarah. Mrs Smith dies first and the property is transferred into Mr Smith’s sole name. You would think that the Will clearly sets out when John and Sarah will inherit so where is the danger?! The scenarios below, however, are very common and expose the vulnerability of when the property becomes solely owned by one parent.
If Mr Smith remarries, any previous Wills made by him will be revoked. His new spouse will be first in line to take all or most of what he owns depending on the size of his estate. This could lead to the new spouse inheriting rather than Mr and Mrs Smith’s two children. Even if the new spouse were to make a Will to include John and Sarah, there is nothing to stop this being re-written and the children being disinherited following the death of their father.
If Mr Smith needs residential care in the future, the whole value of the home that he now solely owns will be eligible to be included in the assessment by the Local Authority. If he does not have separate funds or insurance that can pay for the care needed, the Local Authority can force the sale of a home to pay for care fees.
Asset loss to other third parties
If Mr Smith gets into debt, suffers business problems, remarries and then divorces then as the sole owner of the home, the asset becomes available to creditors and may not reach the children.
The Protective Property Trust – an alternative to leaving matters to chance…
This time Mr and Mrs Smith write a Will that includes a Protective Property Trust. As part of setting up the Will trust, a change to the ownership of the property is made so that each own the property 50/50 as ‘tenants in common’.
When Mrs Smith dies, her share of the property will be held in trust for her two children. She can be safe in the knowledge that should any of the events above happen then her 50% share is protected for her children’s future inheritance as the share is held in trust.
As part of the trust, Mr Smith’s right to continue living in the property is protected by a life interest condition. He cannot be forced out of the home and has a right to reside there. When Mr Smith dies, if none of the events above have taken place then his children will inherit his 50% share too thus giving effect to both he and his wife’s original wishes.
If you would like more information about how a Protective Property Trust may be useful to you in protecting your children’s future inheritance, please contact Claudine Jackson on 0115 8461446 or 07725403584, email firstname.lastname@example.org or use the form below