This article is about Will-based property protection trusts, created within a Will and taking effect on death. Lifetime trusts that transfer your home during your lifetime are a different product and need separate advice.
What a Property Protection Trust is and how it works
A Property Protection Trust (PPT) - sometimes called a Will Trust or a Life Interest Trust - is a trust created within your Will that takes effect on your death. Rather than leaving your share of the family home outright to your surviving spouse, you place it into a trust. The surviving spouse retains the right to live in the property for the rest of their life. When they die or permanently vacate the property, the trust assets - your share of the home - pass to the beneficiaries you have named, typically your children.
For the trust to work, both partners must own the property as tenants in common rather than joint tenants. This is a critical prerequisite. Joint tenants cannot leave their "share" by Will because the right of survivorship automatically passes the whole property to the survivor on death, bypassing the estate. Severing the joint tenancy - converting ownership to tenants in common - must be done before the trust can operate.
A Property Protection Trust only protects the share of the first spouse to die. The surviving spouse's own share remains theirs - and is fully assessable in their estate for IHT, care means tests, and any other purpose.
What a Property Protection Trust genuinely protects against
Remarriage and sideways disinheritance
This is the most important and most legitimate protection the trust offers. If the first spouse dies leaving everything outright to the survivor, the survivor is free to remarry. Remarriage automatically revokes any existing Will. The new spouse may then inherit everything - including assets that originally came from the deceased first spouse - leaving the children of the first marriage with nothing. A Property Protection Trust prevents this: the deceased spouse's share is held in trust and ring-fenced for their chosen beneficiaries regardless of what the survivor subsequently does.
The survivor's financial difficulties
If the surviving spouse encounters serious financial difficulties - significant debt, bankruptcy, or a large civil judgment - assets they own outright may be at risk. Because the deceased partner's share is held in trust rather than owned outright by the survivor, it may be better protected if the survivor later faces financial difficulty.
The survivor changing their Will
Without a trust, there is nothing to prevent a surviving spouse from making a new Will leaving everything to different beneficiaries - a new partner, a charity, one child at the expense of another. The trust removes this risk for the deceased spouse's share. Whatever the survivor does with their own half, the trust half passes to the named beneficiaries when the life interest ends.
What a Property Protection Trust does not reliably protect against
This is where honesty matters - and where some advisers have been less than straight with clients.
Care fees and the deliberate deprivation rule
Property Protection Trusts are sometimes marketed as a way to protect your home from care fees. The reality is considerably more complicated. The trust created in the first spouse's Will - coming into effect on their death - is generally treated as a legitimate arrangement. The surviving spouse's own share of the property, however, remains their assessable capital in any local authority means test. The trust protects the deceased's share; it does not protect the survivor's. A couple expecting the trust to shield the whole property from care costs will be disappointed.
The deliberate deprivation rule
Where a trust or other arrangement is set up with the intention - even in part - of reducing assessable capital to avoid care fees, the local authority can set the arrangement aside and treat the assets as if they were still owned outright. There is no fixed time limit on this rule. A trust established ten years before a care assessment can still be challenged if the local authority concludes that care fee avoidance was a motivating factor. Anyone setting up a trust specifically to avoid care costs should understand this risk clearly before proceeding.
Severing joint tenancy as a prerequisite
Before a Property Protection Trust can operate, the couple must hold the property as tenants in common. Most couples who have owned a home together for many years are joint tenants - the default position on most conveyances - and may never have thought about which form of ownership applies to them.
Severing a joint tenancy is a straightforward legal step. A notice of severance is served on the co-owner (or their solicitor), and the Land Registry title is updated to reflect tenants in common ownership. It can be done unilaterally - one joint tenant can serve notice on the other - though doing so co-operatively as part of estate planning is the sensible approach.
There is no stamp duty, no capital gains tax event, and no other immediate tax consequence to severing a joint tenancy. It is a change in the nature of ownership, not a disposal.
How the trust affects the surviving spouse
A well-drafted Property Protection Trust gives the surviving spouse a genuine and practical right to continue living in the family home - it is not designed to leave them in an uncomfortable or restricted position. In practical terms:
- Right to occupy. The surviving spouse has the right to live in the property for the rest of their life. The trustees cannot evict them or sell the property against their wishes during the life interest period.
- Right to move. If the survivor wants to downsize or move to a different property, the trust can accommodate this. The trust fund follows into the new property, with the survivor retaining the life interest. This requires careful drafting and trustee co-operation, but it is entirely achievable.
- Cannot redistribute the deceased's share. The survivor cannot give away, mortgage, or leave the trust share in their own Will. It is held for the ultimate beneficiaries - the children - and passes to them when the life interest ends.
Tax implications
Clients often ask whether a Property Protection Trust creates tax problems. The answer, in most cases, is no - but the details matter.
Inheritance tax
The deceased spouse's share passes into the trust free of IHT, using their nil-rate band as normal. No IHT arises on the creation of the trust itself. On the survivor's death, the trust assets pass to the children - and provided the trust qualifies as an Interest in Possession trust, the trust assets are treated as part of the survivor's estate for IHT purposes. The survivor's unused nil-rate band and residence nil-rate band can be applied. There is typically no additional IHT disadvantage compared with leaving the share outright to the survivor.
Capital gains tax and main residence exemption
The surviving spouse's right to occupy the property means that the main residence exemption from capital gains tax is preserved for the trust's share of the property while the survivor occupies it as their main home. If the property is sold during the survivor's lifetime, no CGT should arise on the trust's share provided the conditions for the exemption are met. This is one of the significant advantages of a life interest structure over other trust forms.
Stamp duty on severance
Severing a joint tenancy does not trigger stamp duty land tax. There is no change in the parties who own the property, only in the nature of that ownership. No consideration passes. No SDLT return is required.
When a Property Protection Trust is and is not appropriate
A Property Protection Trust is most appropriate where:
- There are children from a previous relationship whose inheritance needs protecting from sideways disinheritance
- There is a genuine concern that the survivor might remarry and inadvertently disinherit the children
- The couple wants to ensure each spouse's share of the home is ring-fenced for their own family
- The property represents a significant proportion of the estate and the intention is to pass it to the next generation
A Property Protection Trust is less appropriate where:
- Both spouses share all the same children and there is no blended family complexity
- The couple's primary concern is care fee protection - the trust does not achieve this for the survivor's share
- The survivor is likely to need to access the capital value of the property in later life to fund care or other needs
- The relationship between the potential trustees and the survivor is already strained
Our honest approach
A Property Protection Trust is a genuinely useful tool in the right circumstances - particularly for blended families and couples who want to ensure their respective shares of the home reach their own children. We recommend it where it serves a clear purpose that the clients themselves understand and endorse.
We do not recommend it as a care fee shield, because it is not reliable in that role. We do not recommend it where the added complexity outweighs the benefit. And we always ensure that clients understand what they are signing up for - including what the trust will not do - before any recommendation is made.
Good estate planning is not about finding clever arrangements. It is about understanding your actual circumstances and putting in place structures that genuinely serve your family's interests. That starts with an honest conversation about what different tools can and cannot achieve.
The information in our guides is provided for general information only and is not a substitute for advice based on your individual circumstances.
Wills, trusts, inheritance tax, Lasting Powers of Attorney and estate planning can be complex, and the right approach will depend on your family, finances, assets and wishes. Laws, tax rules, allowances and guidance can also change over time.
You should not act, or decide not to act, solely on the basis of the information in these guides. Where appropriate, you should obtain personalised legal, financial or tax advice before making any decisions.
Reading a guide or completing the Family Risk Review does not create a client relationship with Prime Wills & Estate Planning.