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Property Protection Trusts can be created during your lifetime or in a will.
Due to their complexity and cost and the need for experienced legal and tax advice Property Protection Trusts are advisable only where there is a clear benefit.
Without significant planning, drafting and good administration a Property protection trust can give rise to disputes between beneficiaries, potentially significant tax liabilities, such as charges to Inheritance Tax or Capital Gains Tax and other complications.
The main drivers for considering a property protection trust are :-
To potentially shield assets from care home fees - however, local authorities can challenge arrangements they see as deliberate attempts to avoid care fees
To ensure your children inherit your property (especially in blended families)
To protect against a surviving spouse remarrying
For couples with children from previous relationships who want to ensure their children ultimately inherit their share of property while still providing for a current spouse or partner
For people with vulnerable beneficiaries - who may not be able to manage inherited property directly.
Parents with concerns about their children's future financial situations - such as potential divorce or bankruptcy.
If you give away your home into a trust but continue to live in it rent-free, HMRC treats it as a "gift with reservation of benefit" (GROB). This means the property is still considered part of your estate for IHT purposes To avoid this, you would need to pay full market rent to the trust (and not receive it back indirectly).
If the property is not your main residence (e.g., a second home), transferring it to a trust can trigger CGT on any gain. If it is your main residence, Principal Private Residence (PPR) relief may eliminate CGT on transfer — but this depends on the trust type and your continued occupation.
If the trust receives rent from you (to avoid GROB rules), it may have to pay Income Tax on that rent. The trust may also be taxed on other income or gains, depending on the type (e.g., discretionary trust vs interest in possession trust).
Instead of a Property Protection Trust, you might consider :-
Simple Mirror Wills - leaving everything to each other, then to your children (simpler but offer less protection)
Outright gift with legal charge - giving your property directly to your children while securing your right to live there through a legal charge
Our specialist team can:
Advise whether a property protection trust is appropriate for your circumstances.
Draft wills containing carefully worded trust provisions.
Help change property ownership to tenants in common if needed.
Explain the full implications and limitations of these arrangements.
Contact us for a consultation to discuss your specific needs and concerns.
Get in touch
If you would like to speak with a member of the team you can contact us on:
Commercial Head of Private Client & Partner
Krystal qualified as a solicitor in 2015 and joined Taylor Rose in November 2019, bringing with her extensive expertise in Private Client matters.
Krystal began her legal career with a training contract at a boutique London law firm. Following qu...
