A property protection trust, also called a life interest trust, is written into your Will. When you die, your share of the home goes into trust. Your partner can live there for life, and afterwards your share passes to the beneficiaries you chose, usually your children. You normally need to own the home as tenants in common.
How a property protection trust works
Each partner owns a share of the home. When the first partner dies, their share passes to trustees rather than to the survivor outright. The survivor has the right to live in the home for life, or until a set event, and when that right ends the trust share passes to the beneficiaries named in the Will.
Because the survivor never owns the trust share, they cannot leave it to someone else in a new Will, and it cannot pass to a new spouse.
Who it suits
- Couples who want to protect their children's inheritance if the survivor remarries.
- Blended families where each partner has children from an earlier relationship.
- Couples who want certainty about where their share of the home ends up.
Tenants in common
If you own your home as joint tenants, your share passes automatically to your partner on death and cannot go into a Will trust. To use a property protection trust you usually need to own as tenants in common. This can be done by serving a notice of severance and registering a restriction at HM Land Registry. A good Will writer will check how you own the property and help with this.
Can the survivor move house?
Most property protection trusts allow the trustees to sell the home and buy another for the survivor, with the trust share carried across. The Will should say this clearly.
Points to understand
- The trustees, often including the survivor, have ongoing duties after the first death.
- The trust may need registering with HMRC's Trust Registration Service.
- Inheritance tax is assessed on the trust share on the survivor's death, and the residence nil rate band can usually still apply where the share passes to children.
This is general information, not legal or tax advice. Ask your Will writer to explain how the trust will work for your family.