Property Protection Trust
A ‘Property Protection Trust’ is based around three basic elements: the ownership of the property, the Trust terms, and the Wills, which contain the Trust instrument.
The trust can only be written whilst both partners remain alive and the property must be owned as Tenants in Common. The Trust instrument is then included in both Wills but does not come into force until after the first death.
Upon the first death their share of the property, typically 50%, is placed into the Trust to be administered by the Trustees nominated in the Will. The Will also specifies who is to be the ultimate beneficiary of this share in the property and the duty of the Trustees is to protect the property for the benefit of the beneficiaries.
The surviving spouse, under the terms of the Trust, has the right to remain living in the property for the rest of their life. On the death of the second spouse the trust comes to an end and the property passes absolutely to the beneficiaries.
Purpose of taking out the Trust
Assessment of the property with respect to Care Home fees.
Should the client need to go into care, the Local Authorities assess both income and capital resources to decide what funding or assistance will be available.
If there is a shortfall in the amount of weekly income that the client receives compared to the weekly care costs (care costs can be anything from £350 to £1000 per week) they can use capital assets to make up for that shortfall.
These include: Money held in the bank/investments – Property - Vehicles
If the surviving co-owner goes into care only their share of the house will be assessed. Under current guidelines (Charging for Residential Accommodation Guide (“CRAG”) published by The Department of Health), the surviving co-owner’s share of the house will be valued at less than his/her share because the market value of the house will be reduced due to the nature of the ownership. A 10% reduction will be applied (to allow for the costs of selling) and, in fact, the value of the share may very well be nil (CRAG paragraphs 7.014/5/9).
A properly established trust set up years before a person needed care would shield assets from having to be sold to meet care fees, but those that were considered to be an attempt to shield assets would be disregarded by the Local Authority.