Trusts / Severance of Joint Tenancy
Protecting Your Assets
A Save & Prosper operate as a legal consultancy providing expert Will writing services and Estate Planning advice. Goodwill’s Legal Services Limited, which carries out the legal work, is
a regulated law firm and so clients can be certain that they are receiving professional advice from a fully insured practice.
We offer a variety of trusts that can be incorporated into your Will to ensure that your assets continue to be protected after your death.
Protecting your assets if you go into care
Sadly, up to one in three women and one in five men will need formal care during their lifetime, with more than 500,000 people currently living in residential care. Under the Care Act 2014, if a person is taken into care the Local Authority can use the value of the home owned by that person to fund his or her own care. This could ultimately mean that when the person dies, there is very little of their estate left to be given to their family.
It is illegal to deliberately avoid paying care fees by giving your property away, however it is permissible for both spouses to make a provision in their Will to “sever the tenancy” and allow each spouse to put their half of the property into a Property Protection Trust for their intended beneficiary(ies). This half of the property is then safeguarded for the family making sure that at least some of the estate is passed on to the children and is not available for the Local Authority to include during the financial assessment for care fees.
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Protective Property Trust and Family Asset Protection
If you die and your spouse/partner remarries, the new spouse could end up getting the house and your children could get nothing.
Couples (married/unmarried) with children from different relationships. With a protective property trust each spouse/partner can decide who will benefit from their share of the value of the home (normally 50%) which will be held on trust for them until after the second death. Without this trust in place, there is a real risk that some children/stepchildren could end up with nothing.
Selling the family home to pay for care home fees. If a couple own a house as beneficial joint tenants, under a standard will, on first death the survivor will normally inherit 100% of the family home. If the survivor, then needs long term care the local authority can then put a charge on the home to pay for care. This could mean your beneficiaries end up with a reduced inheritance or in some cases nothing at all, depending on the length of time in care. So how does a protective property trust work? In simple terms, the trust works by making sure the surviving spouse never owns 100% of the property. On first death it will state that the first to die does not leave his/her share of the property (normally 50%) to the survivor. It will pass into a trust (held by your nominated trustees).
It does however specify the following:
- right to occupy the home for the surviving spouse for the rest of their life
- right to downsize or move if needed
- each spouse can be named as a trustee of the protective property trust.
If the local authority assesses what the surviving spouse owns, they cannot take into account what has already passed into trust (normally 50%) so they can consider half the value of the home, not all of it.
How is this achieved?
We will produce the legal paperwork to change the way you own your property from “joint tenants” to “tenants in common” and draft your wills with the protective trusts included.
During your home visit, a consultant can discuss this type of trust with no obligation to see if it is suitable for your circumstances and answer any questions you may have.
Joint Tenancy – To Tenancy in Common
Severance of Joint Tenancy
Normally, when a couple buy a property, they purchase as Joint Tenants and this means that they both own the whole of the property, and if one of them dies the property will automatically transfer to the other owner. There are various reasons why this may not be the best option for the parties concerned and it is often the case that by severing the tenancy into defined portions, arguments are avoided and the proceeds of sale will pass Whether the intention is to protect your share for someone other than your partner or simply to define the portions in anything other than an equal share, it is essential that you sever the tenancy on the property to avoid the automatic transfer to the joint owner. This is a simple process that we can assist you with.
Severance of joint tenancy from £295
What happens if I re-marry after the death of my spouse?
If you remarry after the death of a spouse and do not update your Will, your estate may become subject to “sideways disinheritance’. Essentially, this means the estate you built up with your former spouse passes to the family of your new one. In some cases, this can even mean the disinheritance your own children!
This is because marriage revokes all earlier Wills and, if not updated, your Will can be deemed invalid, whereupon your estate becomes subject to the Law of Intestacy.
A Property Protection Trust or a Flexible Life Interest Trust can be used to prevent the above scenario by ensuring that your intended beneficiaries still inherit your estate.
I live with my partner, but we are not married. What about Inheritance Tax?
Inheritance tax is a tax which is paid on the value of all you own when you die. The threshold above which you must pay 40% tax is currently £325,000 (known as the Nil Rate Band). For example, if your estate (everything you owned at the time of death, including your house value) was worth £425,000 then you would have a taxable estate of £100,000. This would give rise to a tax bill of £40,000 and
therefore, less money going to your loved ones. The inheritance tax threshold for a married couple is £650,000 for the current tax year, providing they leave everything to each other on first death.
However, this is not good news for everyone as this system doesn’t help couples who are not married, and it doesn’t help those who don’t want to leave everything to their surviving spouse.
If you are an unmarried couple, you could benefit from the inclusion of a Nil Rate Band Discretionary Trust in your Will to allow your partner to make use of your £325,000.00 allowance.
Other Trusts available include:
- Children’s’ Trust
- Discretionary Trust
- Disabled Persons Discretionary Trust
- Asset Protection Trust (Lifetime)
For more information or to book your FREE will review, call me,
Jeff Clarkson at A Save & Prosper today on 01908 590347 07973 283398
Alternatively, fill in the call-back form on this page.