A great solution for many circumstances.
Faye Harlow Smith is a solicitor in our Private Client department specialising in the preparation of Wills. Here she explains why a Life Interest Trust Will can often be a really good solution for a lot of our clients.
A Life Interest Trust Will provides that on your death your property will be held on trust. You choose a ‘Life Tenant’ who will have the right to use and enjoy the property for the rest of their life but who does not receive absolute rights to the property. This means that they cannot sell the property and use the proceeds and they do not choose who ultimately inherits the property. You state in the Will who you want to inherit the property after the death of the Life Tenant.
For example, you can provide for your half share of the matrimonial home to be held on trust for the benefit of your spouse during their lifetime and then on their death to pass to your children absolutely. In this way you protect your share of the property for the ultimate benefit of your children but you ensure that your spouse can continue to live in your shared home for the rest of their life.
Three Main Benefits
There are three main benefits to this arrangement:
The trust is really flexible and can be drafted to meet your individual needs. We can include flexibility that allows the Life tenant to be able to move property or downsize if they wish in future and the trust can be transferred across to this new property.
You can provide that the trust covers more of your estate than just your property, extending the protection provided.
You can also include flexibility to allow capital to be released to the Life tenant I they are in need but this would be at the discretion of the Trustees.
For most married couples, the trust will have no effect on the amount of inheritance tax your combined estates will pay as the arrangement preserves the benefit of the Transferable Nil Rate band.
Further to this, these trusts do not incur exit charges or 10 yearly charges which keeps the administration of the trust very straightforward. Any income received by the trust is due to the Life Tenant directly so trust tax returns are often not required.
The main benefit provided by the Life Interest Trust Wills is the protection of the half share of the property. Because the Life Tenant does not receive the property absolutely then the share of the property is protected for the ultimate beneficiaries. This means that if the Life Tenant falls into financial difficulty, gets remarried (or goes through a divorce) or needs care then the value protected by the trust cannot be used for these purposes.
Also, the Life Tenant cannot choose to disinherit the ultimate beneficiaries in the event of a family fall out as the ultimate beneficiaries right to the property is written in the trust.
Get in touch
It is always important to seek advice from an experienced specialist to discuss your circumstances and consider the different options available to you.
If you would like to discuss using a Life Interest Trust in your Will then please contact Hart Reade. Either call on 01323 727321 to arrange an appointment. Or please fill in the form below and someone will get in touch.
Please note that this article does not constitute legal advice and only provides a brief overview of certain issues. You should always speak to a legal professional to discuss your circumstances and consider your options.