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Protecting your home with a life interest trust

If, as a couple, you own a property, you will often wish for your spouse/partner to inherit your share of the property and for it to then pass to someone else (e.g. your children). Here I explain why it's not always that straightforward.

Key Points:

• If after your death, the surviving owner owns the property outright, they are free to sell it, give it away, or have it repossessed if they have financial difficulties. If they remarry it could end up passing to their new spouse.

• If the surviving owner of a house requires residential care, then the value of their home will be used when assessing their ability to pay for their care. It is possible to protect the value of your half of the home using a property trust.

• If you own your property as joint tenants, when the first of you dies, the survivor will then own the property outright – regardless of what your Will says.

• If you’d like to protect your share of your home to ensure that your children/friends/relatives inherit it, it is possible to use a property trust and still give your spouse/partner a right to carry on living there for the rest of their life.

How could an outright gift go wrong?

Your home is often your most valuable asset. In an ideal world you will have paid off the mortgage before retirement and then, after you have both passed away, your children will inherit the family home.

Unfortunately, it isn’t always this straightforward. There are a number of threats to this scenario:

• You pass away, your spouse/partner inherits the home and then remarries. Your spouse dies and their new spouse inherits the home – potentially leaving your children with nothing.

• You pass away and your partner has financial difficulties, your home could end up being used to pay creditors.

• You pass away, your spouse/partner inherits the home and then changes their Will in later life – potentially disinheriting your children.

• After you pass away, your home could be included in a local authority assessment if your spouse/partner needs to enter a care home. The value of your home could be used to fund their care.

How can you protect your home?

With the correct use of a property/life interest trust most of these scenarios can be negotiated. If you own a property jointly, I need to ensure that you own it as tenants in common, rather than as joint tenants. You are then free to leave your share of the house to who you wish and you can leave someone with a life interest in it (spouse/partner, child, friend).

This means that they have the right to carry on living in the property (or enjoy the rental income) for the rest of their life.

However, they can’t give your share of the property away and it can’t be assessed or used to pay creditors.

You can allow them to move to another property, borrow money or be given capital from any sale of the property.

When we discuss your wishes we can choose the parameters of the trust. I can also help you chose the right trustees, to ensure that everyone’s interests are protected.

If you have already decided that a property trust is the right solution for you, then you can find my fixed fees for including a property trust in your Will here.