Usually, Yes
A Homeowner Protection Will should not normally tie the surviving husband, wife or partner to one house for the rest of their life.
After the first death, the survivor may want to:
- downsize;
- buy a bungalow;
- move closer to family;
- relocate for health reasons;
- move into a more manageable property;
- or simply live somewhere different.
A properly drafted trust can normally allow the existing home to be sold and some or all of the trust’s interest used towards a replacement property.
The protection can move with the survivor.
A Simple Example
David and Susan own their family home.
David dies first.
His Homeowner Protection Will protects his interest ultimately for their children while Susan continues living in the property.
Ten years later the house is too large for Susan.
She wants to move to a smaller bungalow near her daughter.
A properly drafted Homeowner Protection Will should normally allow this.
The original house can be sold.
Susan’s own share and an appropriate amount from David’s trust can then be used towards the new property.
David’s trust does not disappear. It continues within the new arrangements.
The Trust Protects Value — Not Necessarily One Particular House
This is an important point.
The purpose is normally to preserve the deceased person’s protected inheritance.
It is not to preserve the same bricks and mortar forever.
If the original home is sold, the trust value must still be identified and dealt with properly.
It might be:
- reinvested completely into another property;
- partly reinvested;
- or partly retained separately by the trustees.
What Happens If the Survivor Downsizing Leaves Money Over?
Suppose the original house sells for £400,000.
For simplicity:
Susan’s share: £200,000
David’s protected trust share: £200,000
Susan buys a bungalow for £300,000.
One possible arrangement might be:
Susan contributes £200,000.
David’s trust contributes £100,000.
The remaining £100,000 still belongs to David’s trust.
It does not automatically become Susan’s money simply because she has downsized.
The trustees may then need to hold or invest that money and keep proper records until it is eventually dealt with under the trust.
Does the Survivor Have to Buy Another Property?
Not necessarily.
They might eventually choose to move:
- into rented accommodation;
- into sheltered housing;
- to live with family;
- or into residential care.
What happens to the protected trust money will depend upon the terms of the Will.
Major changes like these can also have tax consequences, so the trustees may need advice at the time.
Who Actually Sells the Property?
The survivor may still be the registered owner shown at HM Land Registry.
But where the deceased person’s beneficial interest is protected by a Will trust, another trustee may need to participate in the sale.
This helps make sure the trust’s share of the sale proceeds remains properly protected.
Tell the Conveyancer About the Trust Immediately
This is important.
When the survivor decides to move, the conveyancer should be told from the beginning that:
- one of the original owners has died;
- a Homeowner Protection Will trust exists;
- the deceased had a beneficial interest in the property;
- trustees are involved;
- and there may be a restriction on the title.
Do not wait until contracts are about to be exchanged before mentioning the trust.
What If the New House Costs More?
That can normally be accommodated.
The survivor may contribute:
- their own share of the original property;
- savings;
- investments;
- or other personal money.
The trust can then contribute the amount permitted under the Will.
The beneficial ownership of the new property should clearly reflect who contributed what.
What If the New House Costs Less?
This is where the trust can become slightly more complicated.
Any unused trust capital remains trust property unless the Will provides otherwise.
It might need to be:
- held in cash;
- invested;
- separately administered;
- and eventually passed to the ultimate beneficiaries.
The survivor does not automatically receive the spare trust money.
Could Downsizing Have Tax Consequences?
Potentially, yes.
Where the survivor has rights under the trust and some of the original property value is no longer reinvested into a replacement home, there can be Inheritance Tax or other tax considerations.
Capital Gains Tax questions can also arise when trust property is sold.
The precise position depends upon the trust, the survivor’s rights and what happens to the sale proceeds.
This is why significant changes should be dealt with properly rather than simply dividing up the money informally.
Can the Survivor Just Take the Trust Money Instead?
Not automatically.
The protected capital belongs to the trust.
Whether any capital can be given to the survivor depends upon the powers contained in the Will.
If all of the protected capital were simply handed outright to the survivor, the inheritance protection could be lost completely.
Can the Trustees Buy a Smaller Home and Invest the Rest?
Potentially, yes, where the Will allows it.
For example:
Original trust value: £200,000
Used towards replacement home: £120,000
Remaining trust capital: £80,000
The £80,000 could then remain invested or otherwise held by the trustees.
The survivor may have rights to income depending upon the Will, while the capital remains protected for the eventual beneficiaries.
What If the Survivor Wants to Live With a New Partner?
They may decide to move elsewhere or buy another property.
But that does not automatically make the protected trust capital their own.
Particular care is needed before:
- adding a new partner to the property title;
- mixing trust money with the new partner’s money;
- changing beneficial ownership;
- or using trust assets for somebody else’s benefit.
Those decisions can affect the protection the Will was designed to create.
What About Equity Release?
Moving house does not necessarily solve this problem.
If part of the replacement property still belongs beneficially to the Homeowner Protection Trust, obtaining equity release or a lifetime mortgage may remain difficult.
That is one of the disadvantages which should be understood before the Wills are made.
[Can I Get Equity Release After the First Death? →]
Can the Children Stop the Survivor Moving?
Normally, they should not simply be able to block a reasonable move because they prefer the existing house.
The answer depends upon the Will and the trustees’ powers.
If the children are also trustees, they must make decisions as trustees rather than simply thinking about when they would like to receive their inheritance.
The Will Should Anticipate a Move
A good Homeowner Protection Will should not simply say:
“My spouse can live in my present house for life.”
People may survive their partner for decades.
The Will should consider what happens if the property becomes:
- too large;
- unsuitable;
- too expensive;
- damaged;
- unwanted;
- or simply no longer the right home.
Flexibility matters.
The Important Trade-Off
The survivor should have enough flexibility to move.
At the same time, the deceased person’s protected inheritance needs to remain identifiable.
Both can normally be achieved.
But once the trust exists, the survivor cannot necessarily treat all of the sale proceeds as their personal money.
That is the price of preserving the protected inheritance.
In Simple Terms
Can the survivor sell the original house?
Normally, yes.
Can they move somewhere else?
Normally, yes.
Can trust money be used towards the new home?
Yes, where the Will permits.
Does the trust disappear when the house is sold?
No.
Does leftover trust money automatically belong to the survivor?
No.
Can the protection move to another property?
Normally, yes.
[Find Out If a Homeowner Protection Will Is Right for You]
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Can the Survivor Move House With a Homeowner Protection Will?
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Can a surviving spouse sell the family home and move after a Homeowner Protection Trust starts? Learn how replacement homes, downsizing and protected trust money work.