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Life Interest Trusts for Married Couples

For anyone who wants to know their spouse is secure after death, but also ensure there is something to leave to the children, a Life Interest Trust could be the best way forward.

For anyone who wants to know their spouse is secure after death, but also ensure there is something to leave to the children, a Life Interest Trust could be the best way forward.

What are Life Interest Trusts?

This is a trust usually created in your Will, which on death, grants your spouse the right to occupy your property and potentially receive income, without having the right to the capital. The person with the life interest is known as the “Life Tenant”. At the end of the life of the Life Tenant, the trust comes to an end and the capital transfers to the children or other beneficiaries.

Benefits of a Life Interest Trust

If you are planning for later life, you may be considering what will happen to your spouse and children on death. You may be concerned that your spouse may need to go into care and that care home fees would deplete the value of the family home, meaning there will be little to nothing for the children or grandchildren to inherit.

Equally you may be concerned that after death, your spouse may remarry and leave all or part of your estate to their new family.

For both these scenarios, the Life Interest Trust is intended to ring fence half of the family home, so that regardless of what happens to the survivor’s estate, at least half of the family home will pass to further beneficiaries.

Joint Ownership & Tenants in Common

In England and Wales, any property that is jointly owned, on the death of the first joint owner, automatically becomes solely owned by the surviving joint owner. The principle is the same for all jointly owned assets such as bank accounts or property and supersedes any provisions contained within a Will.

In the case of property, it is possible rather than owning it jointly (“Joint Tenants”) to instead own the property as “Tenants in Common”, where each party owns separate shares in the property and are free to gift them to whomever they want on death.

As you might imagine, in order for the Life Interest Trust to be effective, the property must be held as Tenants in Common. It will be important therefore, to check how the property is held at the Land Registry.

Your Trustees

You will need to appoint between two and four Trustees to administer the trust. They will deal with the day to day running of the trust fund and will have a duty to act in the best interests of the beneficiaries. You can appoint professional Trustees, however it is usually advisable to appoint the Life Tenant as one of the Trustees, as they will be the one living in the property. Whoever you appoint as Trustee, they will not be able to sell the property, without the consent of the Life Tenant.

We are an unmarried couple, can we still have a Life Interest Trust?

The simple answer is yes you can. There are significant IHT implications for unmarried couples however, so we would recommend speaking to us to discuss what you can do.

Setting up a Life Interest Trust

When considering including a Life Interest Trust in your Will, there are a lot of considerations, such as how it will affect your beneficiaries, tax consequences, how you own your property.

If you would like the peace of mind to know that your estate will go where you want it to and to protect it from bankruptcy, divorce or care costs, please contact Andrew James or our Private Client department.

Andrew James

Andrew James

Private Client Solicitor

Contact NRG Law

Bush House
77-81 Alma Road
Bristol BS8 2DP

+44 (0) 117 317 9719
+44 (0) 117 317 9720

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