Basic Will vs. Trust Will: Which is Right for You?

Most people know they need a Will, but what they don't know is that there are two types. A Basic Will is simple and effective. But for true protection of your assets and loved ones, a Property Protection Trust (PPT) is the best option. This article will explain both to help you decide which one is right for you.

What is a Basic Will?

A basic will is the cornerstone of any estate plan, outlining exactly how you want your assets distributed after you're gone. It's a foundational legal document that serves a few critical purposes:

• Asset Distribution: Dictates who inherits your property, money, and possessions.
• Guardian Appointment: Names legal guardians for your minor children.
• Executor Designation: Appoints someone to manage and settle your estate.
• Funeral Wishes: Allows you to include your preferences for funeral arrangements.

How a Basic Will Works:

When you pass away with a basic will, your assets are typically passed directly to the beneficiaries you've named in the document. For many married couples, this means everything goes to the surviving spouse, and then to the children after both parents have died. While this process seems simple, it can leave your estate surprisingly vulnerable.

What is a Property Protection Trust (PPT) Will?

A Property Protection Trust Will, also known as a Protective Property Trust Will, is an estate planning tool designed to safeguard a person's share of their property, typically the family home. Unlike a basic will where assets are directly passed to beneficiaries, a PPT Will places the assets into a trust. This provides an additional layer of protection and control.  

Key features of a PPT Will include:

• Asset Protection: It protects your share of the property from potential threats, such as a surviving spouse's remarriage or the need for long-term care.  
• Flexibility: It allows the surviving spouse to continue living in the family home for their lifetime, ensuring they are not displaced.  
• Bloodline Protection: This type of will ensures that your assets are eventually passed down to your chosen beneficiaries, often children from a previous relationship, protecting their inheritance.
• Tax Efficiency: PPT Wills can offer cost-effective opportunities for managing inheritance tax.  

The Advantages of PPT Wills Over Basic Will

• Protection Against Care Home Fees: A PPT can prevent a local authority from assessing the full value of the family home for care costs, as your share of the property is held in trust. This helps to safeguard your children's inheritance while allowing the surviving spouse to continue living in the home.
• Remarriage Protection: It ensures that your share of assets goes to your chosen beneficiaries, even if your surviving spouse remarries. This prevents your assets from potentially passing to their new spouse and their family.
• Bankruptcy Protection: Assets held in a PPT are generally protected from creditors if the surviving spouse faces bankruptcy, as the assets are not considered part of their personal estate.
• Sideways Disinheritance Prevention: This is a crucial benefit, especially in second marriages. A PPT ensures that your share of the property is held in trust for your children or other chosen beneficiaries. This prevents your share from being passed to a new spouse and their family if the surviving partner remarries, ensuring your assets remain within your bloodline.
• Inheritance Tax Planning: A PPT can be used for tax planning to maximise nil-rate bands and potentially reduce or eliminate Inheritance Tax liability.

How PPT Wills Work in Practice

1. The Trigger: The death of the first spouse is the event that activates the trust provisions in the PPT Will.
2. Property Division: The deceased spouse's share of the property, which is commonly 50%, does not go directly to the surviving spouse. Instead, it is transferred into a trust.
3. Surviving Spouse's Rights: The trust is designed to protect the surviving spouse while they are alive. The provisions typically allow them to:
   • Continue living in the property for the rest of their life.
   • Move to a new home if they need to, with the deceased's share of the property value still being held within the trust.
4. Asset Protection: The trust serves as a protective mechanism. It shields the deceased's share of the property from various risks, such as:
   • Care costs that the surviving spouse might incur later in life.
   • Other potential claims on the surviving spouse's assets.
5. Flexibility: While the assets are protected, the trust is structured to allow for flexibility, such as the ability to move home.
6. Ultimate Beneficiaries: The core purpose of the trust is to ensure that the deceased's share of the property is ultimately preserved and passed on to their chosen beneficiaries, typically their children, after the surviving spouse also passes away.

Who Should Consider a PPT Will?

A trust is a powerful tool to protect your home and assets, especially for:

• Homeowners with significant equity
• Parents who want to secure their child's inheritance
• Blended families managing assets across households
• Anyone concerned about care costs
• Anyone seeking asset protection

Important Considerations

While PPT Wills offer several advantages, there are considerations that should always be kept in mind:

• Complexity: PPT Wills are more complex and require careful drafting compared to a basic will.
• Trust Administration: You will need to appoint trustees, and they may have to take specific actions that wouldn't be necessary with a basic will.
• Property Ownership: This type of will works best when property is owned as "tenants in common." It is less suitable for property owned as "joint tenants."
• Professional Advice: While a basic will might be easier to set up on your own, it is crucial to seek professional advice for a PPT Will to ensure it meets your specific needs.

Making the Right Choice for Your Family

When choosing the right will for your family, it's important to weigh the benefits of a Basic Will against a Protective Property Trust (PPT) Will. While a Basic Will is a good starting point, a PPT Will offers significantly more control and protection for your assets.

Although a PPT Will has a slightly higher initial cost and is more complex, the added benefits often make it the better choice. It can provide greater peace of mind by protecting your assets from things like future care costs and ensuring your inheritance is passed down to your children as you intend.

To decide which option is right for you, consider these factors:

• The value of your assets, especially your home.
• Your family structure and relationships.
• Any concerns you have about future care costs or the potential need for long-term care.
• Your desire to protect your children's inheritance.

Closing Thoughts

Estate planning is about more than just distributing assets; it's about protecting your loved ones and securing their future.

A basic Will is a good starting point, but a Property Protection Trust (PPT) offers far more robust security.

A PPT Will can protect your family's future against various risks, including care home fees and sideways disinheritance. This makes it an increasingly popular choice for those wanting to ensure their wealth and assets are kept safe for future generations.

Protecting your assets is a critical piece of the puzzle, but true peace of mind comes from a complete plan. This includes considering who would make crucial health and financial decisions for you if an accident or illness left you unable to. For this, a Lasting Power of Attorney (LPA) is the essential legal tool.

Now you have a better understanding of both options, you can make an informed decision to provide the best protection for your family.