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What is A Probate Preservation Plus Trust ?
Geoff Hibbert

Geoff Hibbert

Published on March 2, 2021

A Probate Preservation Plus Trust will be used to protect your assets throughout your lifetime. Your assets can come under attack from a number of sources, a main concern of which for many is the cost of long term later life care. In short the probate preservation trust will help to ensure that your assets are protected and in conjunction with your will ensures that your intended beneficiaries get to enjoy those assets you leave behind and they can not be hoovered up by outside predators. A PPPT is a near perfect form of asset protection planning and can be considered the king of protection trusts.

If as is traditional just a mirrored will is in place between spouses, when the first of the couple passes away, their assets would pass to their surviving spouse. So far so good and all as intended. However at that point all of the survivors own assets plus those inherited from the spouse are now owned by the survivor and have no wall of protection around them. They are therefore liable to attack from the outside. in the case of the survivor needing to go into long term care, then the whole of those now combined assets can be assessed by the local council and claimed by them to contribute toward care costs meaning that the intended beneficiaries of the survivors will can be left with next to nothing to inherit.

In cases where no will has been made then the estate would, in most cases pass largely to the surviving spouse and again be open to attack if not protected by a trust specifically designed for the job.

In either of the scenario’s outlined above the net result is that there is a good chance that the assets of the estate will not reach the intended beneficiaries at the time of the second death. Trusts and in particular our probate preservation plus trust are ideal tools to use in conjunction with wills to ensure that assets are passed on to their intended beneficiaries.

How can the estate be attacked?

Assets not protected by trusts can be attacked from various angles and sources, This counts not just for the current generation but for those generations inheriting. Attack sources include, but are not limited to.

  1. Local authority care fees.
  2. Divorce or separation settlements.
  3. Taxation.
  4. Bankruptcy or creditor claims.
  5. Marriage or remarriage after death.

If the assets are distributed to the beneficiaries simply as instructed in the will this is termed as “distributing assets absolutely” this means that property, cash and other assets owned by the estate are paid directly to beneficiaries. Immediately this is done they form a part of the beneficiaries estate and become liable to attack and ultimately, partial or complete loss. This of course assumes that the person has not been through the long term care system and that there are actually assets left to pass on to the family.

Care Home Costs Asset Depletion

The fist point of attack for many estates is whilst the asset owner is still living and taken into care. It is not unusual in such circumstances for an estate valued at many hundreds of thousands to be drained to £14,250. At this point the state picks up the cost of care in full. With savings or assets between £14,250 and £23,500 there is a shared cost between individual and the local authority. Where assets are over £23,500 all of the cost is born by the assets of the person in care. This includes their home and the local authority could enforce its sale.

The cost of long term care

When a person enters care they are, without exception means tested and their assets are assessed for value to work out how much they can contribute to their care costs. It is only the very few, who are almost without assets who escape paying toward their costs, certainly just about every home owner would be liable.

With care homes costing from £600 per week and Nursing homes £800 per week you can see how an estate can be drained of assets quite quickly. Costs for those staying in their own home are around £20 per hour and it is not unusual to see fees of £1,650 per week for those needing constant care. At the lower end of the fee scale a care home would eat up £31,200 per year and at the top end full time home care would potentially eat into the estate at a rate of £85,800 per year.

I am pretty sure that no one who has survived to an age where this care is required wants the fruits of their life’s labours to be spent this way. The beauty of the probate preservation plus trust is that this needless waste of assets can be avoided at a reasonably low cost and with minimal time and effort.

How does the probate preservation trust plus work?

With a little strategic planning the use of trusts can ensure that our family and other chosen beneficiaries can benefit from our assets as we intended them to without any threat of seizure or loss.

Just about any physical asset, whether that be the contents of the bank account, land, property, jewellery etc can be protected, but in addition to those immediately visible assets such as the benefits from pension plans, life assurance policies and business assets can be protected. Can you imagine having to close a family business you have worked in for years as HMRC seize its assets to pay your parents tax bill, rather than you inheriting it?

Not enough people are aware of the strategy of using trusts to protect assets and leave themselves open to losing everything they have worked for. Here at SLH wills we are dedicated to helping our clients preserve their assets and ensuring their families benefit from their endeavours as was intended.

As a part of our asset protection program we would write will and a property preservation plus trust at the same time, the trust will ensure that the beneficiaries (usually the children or grandchildren) are named and are the recipients of the estate. Protections for the survivor are also written into the trust so that they can live in the property until death and can remarry without affecting the trust if required. they can also sell the house and buy another if that is what they decide. All of this is allowed within the terms of the trust and therefore it can be seen as quite flexible as far as survivor rights are concerned.

Key to the operation of the trust is that if long term care is required the local authority can not take the property within the trust into account whilst carrying out their means tested assessment. This is because the trust owns the assets at this point and not the individual so it is no longer a part of their estate. On the death of the survivor the intended beneficiaries would inherit as planned.

In order to get maximum benefit is the home is owned as joint tenants then ownership must change to tenants in common. Once the property is owned in this way you are able to gift your own share of the property to whomever you wish, within the terms of your will. A property preservation plus trust would be created alongside the will of each of the property owners to take care of their individual share of the property.

Other points you need to be aware of.

  1. As this trust is linked to the will there is nothing can stop you selling your house, raising a mortgage or loan against it or even renting it out.
  2. if the survivor remarries or cohabits, they can not divert the intentions of the first to die as their share is already bound by the terms of the trust and owned by the trustees. This can be particularly important in cases where the first party dies at a young age.
  3. In cases where more than one property is owned it is also possible to write individual trusts for each property so they can be left to different beneficiaries.
  4. If your primary concern is mitigating inheritance tax then this is not the correct trust. We can provide other trusts more suitable for that task. This trust is considered neutral for IHT. This means that the full value of the estate would remain open to IHT assessment as it would for this purpose remain a part of the survivors estate even though the individual asset does not.

Where a Probate Preservation Plus Trust can help with IHT

Eliminates Chargeable lifetime transfers

The PPT helps you to avoid chargeable lifetime transfers. Sometime it is necessary to undertake hours of painful research to assess how much a person may have settled into trust in the past 7 years, people may be vague about this or have forgotten exactly what has been done. Our PPPT ensures that no matter what has been done before a chargeable lifetime transfer will never be charged.

Avoids periodic and exit charges.

Property prices have achieved consistent growth over many years and hopefully will continue to do so. if someone moves £325,000 into a trust at the moment they will pay what are known as periodic charges in 10 years time. Our PPPT ensures that no matter how much that property has risen in value you will never have to pay either a periodic or exit charge.

Avoids spouse paying any IHT on first death

As we mentioned above using a PPPT will not negate IHT liability, however rising property prices can cause problems for married couples who have moved their property into Trust in their lifetime. Any increase in house price over and above the Nil Rate Band on first death can create an IHT liability as the usual spousal exemptions cannot be used.
The PPPT ensures that, no matter how much growth in value the Property has experienced, there will never be an “unexpected” IHT liability caused by the Trust.

Obtains the Residential Nil Rate Band allowance

To qualify for the additional relief a client’s property must pass through their Will (or intestacy) to a “Lineal Descendant”. Any property placed into Trust during a client’s lifetime cannot pass to “Lineal Descendants” as required.
The PPPT has been drafted to ensure that, if the clients Executors (Personal Representatives) need to benefit from the Residential Nil Rate Band, the property can fall through the client’s Will to Lineal Descendants.

Is there any guarantee that the Probate Preservation Plus Trust will work

Along with our legal partners Countrywide Tax and Trust Corporation we have been regularly taking on challenges from local authorities and to date neither we or Countrywide have lost a case.

in fact we are so confident of our success rate we offer a full money back guarantee if your case does fail after you take out or Probate Preservation Plus Trust.

The Probate Protection Plus Trust can be take out either by a couple or a single person and is designed as a form of lifetime asset planning to protect assets from attacks as described above and those listed below:-

  1. Divorce
  2. Creditors / Bankruptcy
  3. Testing for Disabled Beneficiaries
  4. Taxation & Generational IHT
  5. Care Fees
  6. Probate Fees & Delays
  7. Costs & Delays from the Court of Protection.

Probate Preservation Plus Trust Guarantee

Our simple money back guarantee covers those who have who have used our PPPT to establish their estate planning, entered care and have had the local authority challenge the trust.

When a person enters care the local authority immediately issue and order for a section 47 Financial assessment. (means testing) our team of specialist legal experts will act on your behalf and speak directly to the local authority. if they decide to challenge the trust all legal costs will be covered up to a maximum of £500 plus VAT

Our legal team will complete all of the necessary paperwork and will construct the legal arguments which are required for your defence to uphold the planning and win your case.

if for any reason we lose the case and the home is taken into the assessment for affordability of long term care then you will be fully reimbursed for the cost of setting up the trust.

We have never yet had to pay out on this guarantee as no cases have been lost! Our Probate Preservation Plus Trust makes sense!!

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