• Andrea Mapstone

Can Protective Property Trusts really protect against Creditors?

Protective Property Trusts (PPT’s) are a common and effective way for someone to protect their share of their home after they have died. A PPT is written into the person’s Will and only takes effect after their death, so up until this point they will continue to own their home in the usual way.

PPTs are often the ideal solution for couples who want to ensure that at least some of their home will always be protected after their death and not all of its value will be swallowed by any potential fees the survivor may need to incur in the future. PPTs can also provide reassurance to couples who may not share the same children and want to be certain that their share of the property will ultimately pass onto their own children. PPTs are often a sensible alternative to passing everything onto their surviving partner outright.

Once the PPT has been set up, the surviving partner will continue to own their share of the property, but the deceased’s share will be held separately in Trust. If the surviving partner just owns their share (usually half) of the property outright, only this share can be available to future creditors. The deceased’s share held in Trust will remain safeguarded and will be inherited by the couple’s loved ones after both of their deaths. So, the deceased’s share of the property will always remain protected, even if the survivor’s share of the property is required to pay future fees.

How does it work?

A PPT takes effect after the first death of a couple. The PPT will direct that the deceased’s share of their home should pass to their appointed trustees who will need to look after this share of the property by placing it into Trust. The details of the Trust will be written into the deceased’s Will, which will likely provide an instruction to the Trustees that the deceased’s surviving spouse should be able to remain in the property during their lifetime and continue living there as if they were the sole owner.

The exact powers the trustees and the surviving partner will have can vary depending on what has been written into the Will. For example, the surviving partner may have the right to transfer the Trust to another property (if they decide they would like to move to a new house in the future).

A PPT will not be created automatically after someone has died, it will need to be set up correctly by the Trustees. This will include transferring the ownership of the deceased’s share of the property into the names of the Trustees. The Trustees will also have ongoing responsibilities once the property trust has been set up.

What does a Trustees do?

Trustees must follow certain statutory rules and as well as any terms outlined in the Trust written in the Will. In general, most things which a person should or would want to do with their own house can be done by the trustees along with the surviving partner. For example, trustees should ensure that the house is properly insured and maintained by the surviving partner and will need to be involved in any sell of the property. Depending on the terms of the Trust, they may also need to manage cash accumulated by the property, perhaps from future rental income or if there is surplus cash from a house sale.

Trustees should always seek the appropriate advice and consider the needs of the surviving partner before making any decisions. The role of a Trustee should not be undertaken lightly. Trustees can be held personally liable for any mistakes they make and a Trust will often continue for many years.

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