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Property Protection Trusts UK: Complete Guide for Homeowners

· 26 min

Note: The following scenario is fictional and used for illustration.

Michael, 62, owned a £450,000 semi-detached home in Birmingham with his second wife, Carol. He had two adult children from his first marriage and wanted to ensure they inherited his share of the property. When Michael died unexpectedly from a heart attack, he and Carol owned their home as joint tenants—meaning his 50% share automatically passed to Carol through survivorship, bypassing his will entirely.

Three years later, Carol remarried, and Michael's children watched their inheritance disappear when Carol updated her will to leave everything to her new husband.

Michael's story illustrates a common fear: without proper planning, your children could be accidentally disinherited, even when you have a will.

According to UK homeowner data, 28.36 million people in the UK own their homes, with property representing most families' largest asset. Yet many don't realize that how they own their property—as joint tenants or tenants in common—determines who inherits it, regardless of what their will says.

This guide explains how property protection trusts work in the UK, when they're genuinely beneficial, their limitations regarding care fees, and when simpler alternatives achieve the same goal without the complexity and cost.

Table of Contents

What Is a Property Protection Trust?

A property protection trust (also called a protective property trust or property trust will) is a trust created in your will that comes into effect when you die. It protects your share of a property by placing it into a trust for your chosen beneficiaries (usually children) while giving your surviving partner the right to live in the property for their lifetime.

The trust only activates on death—it's written into your will and doesn't affect property ownership during your lifetime. This distinguishes it from lifetime trusts, which transfer ownership while you're still alive.

Property protection trusts use specific terminology. The surviving partner becomes the life tenant—the person with the right to occupy the property. The remaindermen or ultimate beneficiaries are the people who inherit after the life tenant dies. The trustees are the people appointed to manage the trust and make decisions about the property.

According to UK homeowner statistics, 115,000 new trusts were registered in the 12 months to March 2024, with property protection trusts being a popular estate planning tool among UK homeowners.

When David dies, his 50% share of the £400,000 family home goes into a property protection trust. His wife Emma becomes the life tenant with the right to live there. David's two children from his first marriage are the ultimate beneficiaries who will inherit his share when Emma dies.

The main appeal of property protection trusts is threefold: they allow your partner to continue living in the home, they protect your share from being redirected if your partner remarries, and they provide limited protection from your partner's care fees. However, these benefits come with significant complexity and cost, which we'll explore throughout this guide.

How Property Protection Trusts Work in Practice

During the life tenant's lifetime, they enjoy substantial rights to the property. The life tenant has the right to live in the property rent-free, the right to any rental income if the property is let, and the right to sell the property (with the trustees' agreement) and purchase a replacement property with the proceeds.

However, the life tenant's rights are limited to use and income—not ownership. They cannot give away the property, cannot leave it to someone else in their will, and cannot spend the capital value. The underlying ownership remains in the trust for the ultimate beneficiaries.

The trustees' responsibilities include managing the trust, agreeing to major decisions such as selling the property, balancing the interests of the life tenant against those of the ultimate beneficiaries, and keeping proper records. Trustees have a legal duty to act in the best interests of all beneficiaries, which can sometimes create tension.

When selling the property, the life tenant needs the trustees' consent. This protects the ultimate beneficiaries from having their inheritance depleted unnecessarily. The trust continues with the sale proceeds, and the life tenant can use the money to purchase another property or receive income from investing the proceeds.

Emma wants to downsize from the £400,000 family home to a £250,000 bungalow. The trustees (David's brother and sister) agree to the sale. The trust now holds £200,000 in cash (50% of sale proceeds) plus 50% ownership of the new £250,000 bungalow. Emma continues as life tenant of the new property.

When the life tenant dies, the trust ends automatically. The deceased's share passes directly to the ultimate beneficiaries named in the original will. This distribution bypasses the life tenant's estate entirely—meaning it doesn't matter who the life tenant married after your death or what their will says. Your chosen beneficiaries receive their inheritance as you intended.

This mechanism prevents the remarriage scenario that caught Michael's children. If Michael had owned his property as tenants in common and created a property protection trust, his share would have passed to his children when Emma died, regardless of her remarriage.

Joint Tenants vs Tenants in Common: Why It Matters

Understanding property ownership types is crucial because property protection trusts only work if you own property as tenants in common. The difference between joint tenancy and tenancy in common determines whether your will controls who inherits your property share.

Joint tenants each own 100% of the property together. When one joint tenant dies, their share automatically passes to the surviving joint tenant(s) through "right of survivorship." This happens by operation of law—it doesn't matter what your will says. The will is irrelevant for jointly owned property.

Tenants in common own separate, distinct shares of the property. These shares are typically 50%-50% for couples, though any split is possible (60%-40%, 70%-30%, etc.). Each tenant in common can leave their share to whoever they choose in their will. There is no automatic survivorship.

Michael's critical mistake was owning his home as joint tenants. When he died, the survivorship rule meant Carol automatically inherited 100% ownership, completely bypassing his will. His carefully drafted will leaving his share to his children was worthless for the property because joint tenancy overrides will instructions.

To change from joint tenants to tenants in common, you must sever the joint tenancy. According to GOV.UK guidance on joint property ownership, "You can change from joint tenants to tenants in common, for example if you get a divorce or separate and want to leave your share of the property to someone else."

The severance process involves serving written notice of severance on the other co-owner(s) and notifying HM Land Registry using Form SEV. You can sever a joint tenancy without the other owner's agreement, though it's usually better to discuss it beforehand to avoid misunderstanding.

Before setting up a property protection trust, check your property title deeds to see whether you own as joint tenants or tenants in common. You can obtain title information from the HM Land Registry. If you're joint tenants, you must sever the tenancy first—otherwise the property protection trust will be worthless because survivorship will still apply.

Can Property Protection Trusts Avoid Care Home Fees?

Many will-writing companies market property protection trusts as care fee protection. The reality is considerably more limited and nuanced than these marketing claims suggest.

Property protection trusts offer limited protection against care fees in one specific scenario: when the first partner dies and their share goes into trust, that share is protected from the surviving partner's care fees.

Robert dies and his £200,000 share of the family home goes into a property protection trust. Ten years later, his wife Susan needs residential care. When the local authority assesses Susan's finances, they can only consider Susan's £200,000 share of the property as her asset. Robert's £200,000 is owned by the trust, not Susan, so it's protected from her care fee assessment.

This protection only applies to the deceased partner's share protecting against the surviving partner's care fees. Property protection trusts do NOT protect your own assets from your own care fees.

Current care fee thresholds determine when you must self-fund care. If you have assets above £23,250 in England and Northern Ireland, £24,000 in Wales, or £35,000 in Scotland, you must pay for care yourself.

According to care home cost data, the average care home cost is £1,406 per week for residential care (£73,000 per year) and £1,558 per week for nursing care (£81,000 per year). Regional variations are significant: London averages £1,548 per week versus £1,112 in the North East.

These substantial costs explain why people seek protection. However, setting up a property protection trust and then transferring your share into trust during your lifetime (not just in your will) specifically to avoid care fees could trigger deprivation of assets investigations.

If you set up a property protection trust in your will, it only activates when you die. At that point, you're not avoiding care fees—you've already died. The protection applies to your surviving partner's potential future care needs, not yours.

The Deprivation of Assets Rules Explained

Deprivation of assets is a critical concept that many people misunderstand, often because of misleading information about a supposed "7-year rule."

According to the Care and Support Regulations 2014, deprivation occurs when you "intentionally reduce your savings, assets or income to avoid using their value towards paying for your care and support."

The most important fact about deprivation of assets: there is no 7-year rule for care fees. The common belief that assets are "safe" after seven years is completely false for care fee assessments.

As local authority guidance confirms, "There is no time limit for how far back a council can assess that there has been an alleged deprivation of assets when carrying out a financial assessment for care fees."

The 7-year rule applies to inheritance tax on lifetime gifts—not care fees. People confuse these two completely separate areas of law, sometimes with serious consequences.

Local authorities consider several factors when investigating potential deprivation. Did you have a reasonable expectation of needing care when you transferred the asset? Was avoiding care charges a significant motivation for the transfer? What was the timing relative to your health status?

If you transfer your home into trust at age 45 while healthy and employed, that's very different from transferring it at age 80 after a dementia diagnosis. The timing and context matter enormously.

Margaret, 78, transferred her £350,000 home into trust for her daughter in 2022. In 2024, she developed dementia and needed residential care. The local authority investigated and determined she had a reasonable expectation of needing care when she made the transfer. They assessed her as still owning the £350,000 and pursued her daughter for care fees up to that amount.

The consequences of deprivation are serious. The local authority treats you as still owning the asset (notional capital), meaning you're assessed as if you still have it even though you don't. They can recover costs from the third party who received the asset, up to the benefit they received. Deliberately depriving assets to avoid care fees is a criminal offense.

Property protection trusts created in wills are generally safer from deprivation challenges than lifetime trusts because they only activate on death. You're not transferring assets during your lifetime to avoid your own care costs. However, they only protect the deceased's share from the survivor's care fees—they're not care fee avoidance schemes.

Inheritance Tax Implications of Property Trusts

Property protection trusts have complex tax implications that vary significantly depending on when the trust was created and the value of your estate.

The current inheritance tax threshold is £325,000 nil-rate band per person, plus £175,000 residence nil-rate band if leaving your home to direct descendants. Most couples can pass up to £1 million tax-free if they own a home and leave it to children, using both partners' combined allowances.

Property protection trusts created in wills before 22 March 2006 receive more favorable tax treatment. These pre-2006 trusts are generally treated as "interest in possession" trusts where the life tenant's interest is treated as part of their estate for inheritance tax purposes.

Trusts created after 22 March 2006 may be treated as "relevant property trusts" subject to 10-yearly inheritance tax charges if trust assets exceed the nil-rate band. This is a significant tax burden that many people don't anticipate.

The 10-yearly charge applies to relevant property trusts at up to 6% of the value exceeding the nil-rate band. A trust holding £500,000 in assets exceeds the £325,000 nil-rate band by £175,000. The 10-yearly charge could be up to £10,500 every decade.

Exit charges may also apply when assets leave the trust, such as when the life tenant dies and the property passes to the children. Additional inheritance tax may be due depending on timing and value.

The residence nil-rate band adds further complexity. Property held in certain types of trusts may not qualify for the residence nil-rate band, depending on the trust structure and when it was created. This could mean losing up to £175,000 of tax-free allowance.

According to HMRC guidance on protective trusts, the tax treatment depends heavily on the specific trust structure and circumstances. Professional advice is essential to navigate these rules correctly.

Property protection trusts have complex tax implications. The cost of getting this wrong—unexpected inheritance tax charges, losing residence nil-rate band allowances, or triggering 10-yearly charges—can far exceed the cost of proper legal and tax advice upfront.

For estates approaching or exceeding inheritance tax thresholds, specialist advice from a solicitor and tax advisor experienced in trust taxation is not optional—it's essential to avoid costly mistakes.

When a Property Protection Trust Makes Sense

Property protection trusts are beneficial in specific situations, but they're not appropriate for everyone. Understanding when they genuinely add value helps you avoid paying for unnecessary complexity.

Property protection trusts make most sense in these situations:

Blended families: You want your partner to live in the home after you die, but you want to ensure your children from a previous relationship eventually inherit your share. This is perhaps the strongest use case for property protection trusts.

Remarriage concerns: You want to prevent your share being redirected to a new partner if your spouse remarries after your death. Michael's story from the opening demonstrates exactly this risk.

Vulnerable beneficiaries: Your children have special needs, addiction issues, or are in financially unstable situations, and you don't want them receiving a lump sum inheritance immediately. A trust allows controlled distribution over time.

Asset protection from creditors: You want to protect your share from your partner's potential creditors or bankruptcy, though this protection has legal limits.

Preventing forced sale: You want to ensure your partner cannot be forced to sell the home to pay debts or be pressured into selling by other beneficiaries who want their inheritance.

However, simpler alternatives often work better in these situations:

Simple estate, no blended family: If you're married with shared children and trust your spouse to leave everything to those children eventually, a simple will is usually sufficient. The complexity of a trust isn't justified.

Limited estate value: If your combined estate is well below inheritance tax thresholds (under £500,000 total), the complexity and cost of a property protection trust may not provide enough benefit to justify the expense.

Young couples: If you're under 50, healthy, and circumstances may change significantly over the coming decades, keep your will simple and review it regularly instead of locking in complex trust arrangements.

Care fee protection as sole goal: Property protection trusts are NOT effective care fee avoidance tools. Don't set one up purely for this reason—you'll spend £500-£1,500 for limited benefit.

The cost-benefit calculation matters. Property protection trusts cost £500-£1,500 to set up for straightforward situations, with some providers charging up to £3,750 for complex estates. You may also face ongoing trustee administration costs and periodic legal or tax advice fees.

Compare this to simple mirror wills, which couples can create for significantly less. For many families, the simpler solution achieves their core goals—ensuring their partner can live in the home and their children eventually inherit—without the expense and complexity of formal trusts.

Alternatives to Property Protection Trusts

Several alternatives may achieve similar goals with less complexity and cost. The right choice depends on your specific circumstances and primary concerns.

Simple Mirror Wills with Tenancy in Common

Convert to tenants in common and each leave your share to your children in your will.

Pros: Simple, low cost, children inherit your share when you die.

Cons: The surviving partner could potentially be forced to sell the home to release the children's inheritance. No protection if the survivor remarries and changes their will.

Life Interest in Will (Without Full Trust)

Leave your share to children but give your surviving partner the right to live there.

Pros: Simpler than a full property protection trust while achieving basic protection goals.

Cons: Fewer legal protections than a formal trust structure. Potential for disputes between the life tenant and remaindermen about maintenance costs, improvements, or selling.

Outright Gift to Children with Agreement

Gift your share to children during your lifetime with a formal agreement that your partner can continue living there.

Pros: Removes the asset from your estate for inheritance tax purposes.

Cons: High risk—children could force a sale despite the agreement. The asset becomes exposed to their creditors or divorcing spouses. Highly likely to trigger deprivation of assets investigations if you need care.

Lifetime Interest Trust

A more flexible trust structure than property protection trusts, potentially including discretionary elements.

Pros: Greater flexibility for trustees to respond to changing circumstances. Better protection in complex family situations.

Cons: More complex to set up and administer. Higher setup costs (£1,000-£2,500 typically). Requires ongoing trust administration and potentially professional trustees.

Simple Will with Letter of Wishes

Leave everything to your spouse with a letter of wishes requesting they leave assets to your children.

Pros: Maximum simplicity and flexibility for the surviving spouse.

Cons: Not legally binding—the surviving spouse can completely ignore the letter and leave assets elsewhere. Provides no actual protection.

A decision framework helps you choose:

If your primary concern is remarriage or blended family situations, a property protection trust or lifetime interest trust provides the strongest protection.

If your primary concern is care fees, don't rely on trusts. Instead, seek proper care fee planning advice from a specialist who can review your complete financial situation.

If your estate is simple and your family is straightforward (married couple with shared children, mutual trust), simple mirror wills are usually sufficient.

If your estate is complex or valuable (over £1 million, or involving business assets, overseas property, or multiple properties), seek specialist estate planning advice beyond DIY solutions or standard online services.

How to Set Up a Property Protection Trust

Setting up a property protection trust involves several steps and, for most people, requires professional legal advice.

Step 1: Assess whether you need one

Use the criteria from the previous section to determine if a property protection trust is appropriate for your situation. Consider simpler alternatives carefully. Calculate whether the cost (£500-£1,500 or more) is justified given your specific circumstances.

Step 2: Check your property ownership

Obtain your title deeds from HM Land Registry to check whether you're joint tenants or tenants in common. You can search property information through the Land Registry's online service.

If you're joint tenants, you must sever the tenancy first. Without severance, a property protection trust cannot work because survivorship will override the trust provisions.

Step 3: Sever joint tenancy (if needed)

Serve written notice of severance to your co-owner. Complete Land Registry Form SEV and submit it to HM Land Registry. There is no fee for this service.

Wait for confirmation of the severance before proceeding to create the trust. This ensures your property ownership structure supports the trust you're planning.

Step 4: Seek professional legal advice

Property protection trusts require specialist knowledge to draft correctly. You need advice on trust structure, tax implications, trustee selection, life tenant rights, and deprivation of assets risks.

Typical costs range from £500-£1,500 for straightforward property protection trusts, up to £3,750 for complex estates involving multiple properties, business assets, or complicated family situations.

Find a solicitor specializing in wills and trusts through the Law Society directory. Look for someone with specific experience in property protection trusts and estate planning.

Step 5: Draft trust deed and will

Your solicitor drafts the property protection trust provisions into your will. This includes specifying the life tenant, ultimate beneficiaries, and trustees (usually 2-3 people). The will should define the life tenant's rights (occupation, selling, rental income), include trustee powers and responsibilities, and consider scenarios like the life tenant remarrying or moving into care.

Step 6: Choose trustees carefully

Select trustworthy individuals who will balance interests fairly between the life tenant and ultimate beneficiaries. Consider appointing a professional trustee if the estate is complex or you anticipate potential family conflict.

Ensure trustees understand their responsibilities and legal duties. Provide for replacement trustees if original trustees die or become unable to act.

Step 7: Sign and witness will properly

Your will must comply with Wills Act 1837 requirements. You must sign the will in the presence of two independent witnesses who are present at the same time. Witnesses cannot be beneficiaries or spouses of beneficiaries.

Store the will safely and inform your executors and trustees of its location.

Step 8: Review regularly

Review trust provisions every 3-5 years or after major life changes such as births, deaths, marriages, or divorces. Update if tax laws change, family circumstances change, or property values increase significantly. Ensure trustees are still willing and able to serve.

When NOT to DIY:

Don't attempt to create a property protection trust yourself if your estate value exceeds £500,000, you have complex family situations (multiple marriages, estranged children, vulnerable beneficiaries), potential tax implications exist (estate near inheritance tax thresholds), you have deprivation of assets concerns (you or your partner in poor health), or business assets or overseas property are involved.

When simple wills are sufficient:

For straightforward families (married couple with shared children), estates well below inheritance tax thresholds, couples who trust each other to provide for shared children, and situations without remarriage concerns, simple wills typically provide adequate protection without unnecessary complexity.

Frequently Asked Questions

Q: What is a property protection trust in the UK?

A: A property protection trust (also called a protective property trust) is a trust created in your will that protects your share of a property when you die. It allows your surviving partner to live in the property while ensuring your share ultimately passes to chosen beneficiaries (usually children) rather than being used for care fees or lost to remarriage. The trust only activates on your death and requires you to own the property as tenants in common, not joint tenants.

Q: Can a property protection trust prevent care home fees?

A: Property protection trusts offer limited protection against care fees. While they can protect the deceased partner's share of the property from the surviving partner's care fees, they do NOT protect your own assets from your own care fees. Local authorities can investigate deprivation of assets with no time limit, and if they determine you deliberately deprived yourself of assets to avoid care costs, they'll assess you as still owning those assets. Property protection trusts are not reliable care fee avoidance tools.

Q: How much does it cost to set up a property protection trust?

A: Setting up a property protection trust typically costs between £500 and £1,500 in professional fees, depending on complexity. This includes drafting the trust will, legal advice, and severance of tenancy (converting from joint tenants to tenants in common). Some providers charge up to £3,750 for comprehensive service. For simple estates, this cost may not be justified compared to straightforward mirror wills.

Q: What is the difference between joint tenants and tenants in common?

A: Joint tenants each own 100% of the property, and ownership automatically passes to the survivor when one dies through "right of survivorship," bypassing the will. Tenants in common own separate shares (such as 50%-50%), and each can leave their share to whoever they choose in their will. You must own property as tenants in common for a property protection trust to work—if you're joint tenants, the survivorship rule overrides any trust provisions in your will.

Q: What are the tax implications of a property protection trust?

A: Property protection trusts created in wills before 22 March 2006 are generally treated as part of the life tenant's estate for inheritance tax. Trusts created after this date may face 10-yearly inheritance tax charges if assets exceed the nil-rate band (£325,000), charged at up to 6% of the excess value. Complex trusts require specialist tax advice to avoid unexpected liabilities, especially for estates approaching or exceeding inheritance tax thresholds.

Q: Can the surviving partner sell the house with a property protection trust?

A: Yes, the surviving partner (life tenant) can sell the property, but they need the trustees' agreement. The trust continues with the proceeds from the sale, and the life tenant has the right to use the money to purchase another property or receive income from investing the proceeds. The life tenant cannot be forced to sell without their consent, providing security of tenure for their lifetime.

Q: What happens to a property protection trust when the surviving partner dies?

A: When the life tenant (surviving partner) dies, the property protection trust ends and the deceased's share of the property passes to the ultimate beneficiaries named in the original will (usually children). This share is distributed according to the trust terms and bypasses the surviving partner's estate entirely, preventing remarriage or other circumstances from diverting the inheritance away from the intended beneficiaries.

Conclusion

Key takeaways:

  • Property protection trusts protect your share of property for chosen beneficiaries while allowing your partner to live there—but they're not effective care fee avoidance tools
  • You must own property as tenants in common (not joint tenants) for a property protection trust to work—check your title deeds and sever tenancy if needed before creating a trust
  • Property protection trusts make most sense for blended families, remarriage concerns, and vulnerable beneficiaries—not for simple estates with straightforward families
  • Trusts created after 22 March 2006 have complex inheritance tax implications, including potential 10-yearly charges—seek specialist advice for valuable estates
  • Simpler alternatives (mirror wills with tenancy in common, life interest provisions) may achieve your goals without the complexity and cost of a full property protection trust

Protecting your home for your loved ones is one of the most important estate planning decisions you'll make. The key is choosing the right level of protection for your specific situation—whether that's a property protection trust, a simpler alternative, or a straightforward will. Start by understanding your options, assessing your family circumstances honestly, and seeking professional advice when your situation is complex.

Whether you need a complex property protection trust or a straightforward will with tenancy in common, the foundation of your estate plan starts with a properly executed will. Don't delay this critical decision—begin by creating your will today and review it regularly as your circumstances change.

Need Help with Your Will?

Understanding property protection trusts helps you make informed decisions about protecting your home and family. For most people, a straightforward will with proper property ownership (tenants in common) provides adequate protection without the complexity and cost of a full trust structure.

Create your will with confidence using WUHLD's guided platform. For just £99.99, you'll get your complete will (legally binding when properly executed and witnessed) plus three expert guides. Preview your will free before paying anything—no credit card required.

Legal Disclaimer: This article provides general information only and does not constitute legal or financial advice. WUHLD is not a law firm and does not provide legal advice. Laws and guidance change and their application depends on your circumstances. For advice about your situation, consult a qualified solicitor or regulated professional. Unless stated otherwise, information relates to England and Wales.

Property protection trusts have complex legal and tax implications. The information in this article should not be relied upon as a substitute for professional legal and tax advice specific to your circumstances. Trusts created incorrectly or inappropriately can result in unintended tax liabilities, loss of tax reliefs, or failure to achieve intended asset protection. Always consult a solicitor specializing in wills, trusts, and estate planning before establishing a property protection trust.

Legal Disclaimer:

This article provides general information only and does not constitute legal or financial advice. WUHLD is not a law firm and does not provide legal advice. Laws and guidance change and their application depends on your circumstances. For advice about your situation, consult a qualified solicitor or regulated professional. Unless stated otherwise, information relates to England and Wales.

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