Property Trusts

What is a Property Trust?

A Property Trust is a legal arrangement where a property (or a portion of it) is transferred into a trust to be managed for the benefit of specified individuals (the beneficiaries). As well as being a valuable way to protect and manage your property, it can also provide added benefits like tax efficiency and asset protection.

What Property Trusts Can Help You Do

• Protect Your Assets: Property trusts can safeguard your property from potential risks, such as creditors or divorce settlements, ensuring that your assets are preserved for your beneficiaries.
• Avoid Probate: By placing property in a trust, it may not need to go through probate, which can simplify the transfer of assets to your beneficiaries and reduce associated costs and delays.
• Manage Inheritance Tax Liabilities: A Property Trust can help manage and potentially reduce inheritance tax liabilities, making sure more of your estate goes to your loved ones rather than to taxes.
• Give Your Control Over Where Your Assets Go: You can set specific terms for how and when your property is distributed, giving you control over the future management of your assets.

Key Benefits of Using a Property Trust

• Tax Efficiency: Property Trusts can help reduce inheritance tax liabilities and other taxes, such as capital gains tax, depending on how they are structured.
• Protection Against Care Home Fees: Placing a property in a trust can protect it from being included in means testing for care home fees, potentially preserving more of your estate for your beneficiaries.
• Flexibility in Distribution: Trusts offer flexibility in how and when property is distributed, allowing for more tailored and controlled management of your assets.
• Privacy: Trusts are not subject to the public probate process, which can keep your financial affairs private and avoid public scrutiny.

The 5 Different Types of Property Trusts

In the UK, there are several types of Property Trusts, each serving different purposes and offering unique benefits:

1. Life Interest Trust: A Life Interest Trust allows you to designate someone (often a spouse or partner) to live in your property for the rest of their life. After they pass away, the property is then passed on to other beneficiaries, such as children.
2. Discretionary Trust: In a Discretionary Trust, trustees have the flexibility to decide how the property and any income generated from it are distributed among the beneficiaries. This can be useful for managing family assets and ensuring that beneficiaries receive support based on their needs.
3. Bare Trust: A Bare Trust gives beneficiaries absolute right to the property and any income it generates. It’s often used when leaving property to minors, as the property will be held in trust until they reach adulthood.
4. Interest in Possession Trust: This type of trust allows the beneficiary to enjoy the income from the property or live in it, but they do not own the property outright. After their death, the property passes to another beneficiary.
5. Nil Rate Band Trust: A Nil Rate Band Trust is used in inheritance tax planning to make use of the tax-free allowance for each individual, helping to reduce the overall inheritance tax liability on your estate.

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Common Questions About Property Trusts

Can I Still Live in My Property if It’s in a Trust?

Yes, depending on the type of trust you’ve set up, you can still live in your property. For example, a Life Interest Trust allows you to reside in the property while ensuring it is passed on to your beneficiaries after your death.

How do I set up a Property Trust with Joslin Rhodes?

Simply get in touch to book a free one-to-one consultation. Here, our Financial Planner will discuss your circumstances and if a Property Trust is appropriate, they will outline all costs and next steps.

Can I Change My Mind After Setting Up a Property Trust?

Changing a Property Trust can be complicated and may require legal action, depending on the terms of the trust and the agreement of the trustees. So, it’s crucial that you carefully consider your options and get professional advice before setting up a trust.