What is a PPPT?
The purpose of a PPPT is to protect assets, such a property, being used in ways that go against your wishes (for example, paying creditors or for long-term care costs) and ensures the beneficiaries – often children or grandchildren – receive those assets placed in the trust in full.
You can transfer your property into a PPPT during your lifetime, however you can benefit from the trust by remaining in the property.
Does a Will ensure the same protection?
A Will does not offer the same type of protection to a PPPT. In cases where there is a simple Will in place, the assets will pass to the beneficiaries named. However, these assets may then not be fully protected in the case of legal fees, bankruptcy, creditor costs, care fees, division through divorce, or from other circumstances that may result in their seizure.
A PPPT protects the assets for the intended beneficiary and could provide more protection from such claims.
What about the rights of the surviving partner?
The surviving partner who may not be the intended beneficiary can have their rights to stay in a property that is placed into a PPPT protected. A document can be included to state, for example, that the survivor can reside in the property until their death or the point that they go into long-term care.
Are there other benefits to a PPPT?
As well as helping to shield your assets from seizure, a PPPT can help to simplify the probate process and could reduce delays.
Also, by holding your assets in a PPPT, this can ensure that they aren’t added to your beneficiaries’ estates and impact on their own inheritance tax (IHT) obligations.
Residence Nil Rate Band (RNRB) and PPPT
When you pass away, if your estate is worth more than the basic IHT threshold, you may qualify for the residence nil rate band (RNRB) before any Inheritance Tax is due.
To be able to qualify for the RNRB, the full amount or a share of the main residence must pass to lineal descendants.
The PPPT means that the trust can be tailored to ensure that, if necessary, the RNRB can be claimed.
Things to consider
There are some considerations to take into account when it comes to setting up a PPPT. There can be perceived irrevocability and loss of control over the assets when placed in a trust. However, trusts can be made revocable and preparations can be made to ensure that a balance is struck for those who wish to continue having some rights over the assets placed in the trust.
Careful steps need to be taken to ensure that not too much control is retained in order for the trust to stand. However, the ability to protect assets from factors that would be outside of your control is a clear benefit to placing them within the protection of a PPPT.[1]
How can we help?
Our Estate Planning Advisers are able to assess your circumstances to understand if a PPPT is the right route for you. We know how important financial security is to our clients, which is why we take the time to get to know your goals and individual situation.
