Asset Protection Wills
A Life Interest in the main property would give the surviving spouse or partner or a named individual a beneficial right to live in the property and make use of any income generated from the property either from selling the property and investing the proceeds of the sale or by renting the property. If the property is held as Joint Tenants, a Severance of Tenancy would be required to change the ownership to Tenants in Common.
Advantage may be derived under the present Act relating to Residential Care. If the surviving spouse inherited the entire property through joint ownership and subsequently required residential care, then the entire property would be included in assessing their assets. By changing the manner of ownership to Tenants in Common, the estate of the survivor only includes half the value of the property and the other half is safeguarded for the beneficiaries.
Should the surviving spouse or partner remarry or cohabit after the death of the other spouse or partner, the half of the property owned by the deceased is held in a trust for other beneficiaries (normally the children). This share of the property will be protected for those beneficiaries and cannot go to a new partner or spouse.
A Life Interest in the Trust property granted to the surviving spouse or partner means that they have the right to live in the house for life. Should they need to move house, say to downsize, another property can be bought with the agreement of the Trustees, using all or part of the Trust capital. The new property would again have to be held as Tenants in Common, to preserve the Trust’s share of that new property.
The share of the property is normally held in a Trust to prevent any claims on that share of the property. If it was passed directly to the beneficiaries and a claim was made on the assets of one of those beneficiaries, through bankruptcy or divorce, a sale of the property could be forced. By holding the property in a Trust, the beneficiaries do not own the property, the Trust owns it, and so a claim cannot be made.
They also have the right to the income from the Trust for life. If the surviving spouse decided to live in sheltered accommodation, the property could be rented and the surviving spouse would receive the rental. If the property was sold, the Trust’s share of the proceeds of any sale could be invested and the income generated would be paid to the survivor. The capital remains in Trust for the beneficiaries. However, the Trustees do have the power to advance capital to the Life Tenant.