A will that protects your property from assessment for long-term care costs is known as a property protection trust will. The trust receives the first person’s half ownership interest in the family house. This kind of trust is also referred to as a “life interest trust” in the survivor’s favour, which denotes that they can take advantage of the share of the house in the trust while they are still alive. When they pass away, the trust fund passes to other people, typically the family’s offspring.
Example:
In addition to having other shared savings, Mr. and Mrs. Jones jointly own their home. In order to protect their respective half-shares of the house eventually pass to their children while making sure the survivor is protected by being able to stay in the home for the rest of their existence. They also want to make sure that at least half of the property is saved for the benefit of their children in the event that one of them needs long-term care.
If Mr. Jones passes away first, he leaves his half of the property to a property protection trust and leaves his wife the balance of his assets. Mrs. Jones has the right to live in Mr. Jones’s portion of the property and the option to move. Mr. Jones’s portion of the property is kept in the property protection trust and cannot be counted as capital available to cover Mrs. Jones’s care costs if she needs long-term care. Mrs. Jones’s job is secure even if Mr. and Mrs. Jones’s children file for bankruptcy, get divorced, or pass away before her.
When Mrs. Jones passes away, the property protection trust terminates, and the children receive the children’s half of the house (or the sale profits) free of any capital gains taxes.
More Information
It is a will for couples who are worried that one of them might eventually need long-term care.
Each spouse creates a will and bequeaths their respective portions of the property to an estate planning trust.
You must make sure that the family home is owned in your combined names as tenants in common when you create your wills. Following a death, the legal title ought to be transferred into the joint names of the trustees and the surviving spouse (these are usually the same persons as your executors). One of the trustees may be the surviving partner.
The trust is managed by the trustees. The surviving partner and at least one other person will typically serve as trustees, though the survivor’s right to employment is safeguarded.
No. A right to occupy is granted to the surviving spouse by the trust. Because they possess a half-share of the house, the surviving spouse also has the right to occupy it.
There are no unfavourable inheritance tax consequences.
For the purposes of the financial evaluation by a Local Authority, the value of the half share of the property in the trust is a disregarded asset. The surviving spouse’s half share is one of their capital assets, making it possible for an assessment to apply to it.
It can appear simpler at first. However, if any of your children pass away, get divorced, or go bankrupt while you are still alive, you would be exposed. If any of these things happened, it might be necessary to sell the assets so that the child’s part might be distributed to the child’s creditors, the court, or his or her executors. Alternatively, if you and your kids just disagree, they can ask for the property to be sold so they can get their fair part of the sale’s financial gains.
When the surviving spouse dies and the property is sold, if the children possess a half share outright, they may be subject to capital gains tax on that portion of the property if its value has increased since the gift date and it is not their primary residence. Since the trustees can claim principal private residence relief due to the surviving partner’s entitlement to occupancy, there won’t be any capital gains tax owed on the share of the property held by the trust.
This is not a difficulty. The family house may be sold and a different property may be bought in its place. Any profit must be split equally between the surviving spouse and the trustees if the property that is bought costs less than the original property.
You can easily modify your will(s) prior to the first spouse’s death because the trust does not become effective until that point.