The Protective Property Trust
Rosie and Jim have been married for 5 years. They have no children together but both were married previously. Rosie has a daughter and Jim has two sons. Their main asset is their home purchased together held as joint tenants, the most common way when couples purchase their home. Where you have a couple and they each have their own children, a problem arises; how do you ensure your children get ultimately what was yours?
Leaving the property as joint tenants means that on the death of the first person the property will pass automatically by survivorship, meaning it then forms part of the survivor’s estate and would pass to their beneficiaries either by the terms of their Will or by intestacy.
To prevent this from happening the ownership needed to severed to Tenants in Common, this means each will now have their own 50% share to dispose of how they wish. Simply severing the tenancy can lead to some problems; the first being there is no security for the survivor and can lead to problems because the deceased’s children now hold an interest in the property.
Also if their own shares are left directly to their own children and they were married, and then divorce, this share of the property could form part of the settlement, and if they got into financial difficulty then the property could be assessed by creditors.
The best advice would be to advise that Protective Property Trusts are used in each Will. For example both Rosie and Jim each want to leave their respective shares to their own children. Jim passes away before Rosie but instead of leaving the property to his sons his share is to be held in Trust, giving Rosie a life interest to allow her to live in the house, move house if she wishes or downsize to release capital where she would have the right to income. Rosie would not own Jim’s 50% share of the property as it is held by the Trustees and ultimately at the end of the Trust this share then passes to Jim’s children.We all want our respective families to benefit from our deaths especially if we have no children to which to leave our estate.
Take Rosie and Jim, a typical couple, living together not married, no children, want each other to benefit. Jim dies, in his Will he states that his estate is to pass to Rosie, subject to her surviving him for 30 days; Rosie survives Jim by 30 days and takes Jims estate absolutely, when Rosie dies both her and Jim's estates pass according to her Will, to her parents or brothers and sisters leaving Jims family nothing. This is possibly not what Jim would have wanted had it been explained to them both when giving their instructions.
So what are the options?
Option 1 is for each to leave their estate on a life interest trust for each other, and when the survivor dies, the trustees of the trust fund distribute the fund according to the wishes of the testator. However, trusts can be expensive and may also run for many years.
Option 2 is a cheaper alternative is to write the Will as follows:
I give my estate to my partner Rosie subject to her surviving me by thirty days and on her death the residuary estate to be held in two equal shares and distributed as follows:
One share to be divided between the family [named] of Rosie and in equal shares if more than one.
One share [or the remaining share] to be divided between the family [named] of Jim and in equal shares if more than one.
Failure to take account of both families can result in a negligence claim from the aggrieved beneficiaries. Although we have used an unmarried couple, it does not matter whether they are married or not, the result is the same.