Creating a will with a life interest trust over your property allows you to ensure that your home passes to those you choose, whilst also allowing you to provide for another loved one during their lifetime.
‘Life interest trust wills are particularly popular with couples with children from previous relationships. They can also be useful to couples who have married later in life having already established independent lifestyles, and those with dependent siblings or elderly parents,’ says Chris Keenan, a Partner with Humphries Kirk LLP in Dorchester. ‘There are many circumstances in which someone may want a life interest trust in their will, but the reasoning always comes down to balancing the interests of loved ones.’
What exactly is a life interest trust?
A life interest trust is an arrangement whereby your will provides for one beneficiary during their lifetime but, once that person passes away, your assets are transferred to another beneficiary of your choice.
A life interest trust can be created in respect of your entire estate, or in relation to a specific asset. For example, if you have children from an earlier relationship and a property that you purchased before meeting your current partner, you might be keen to ensure that your children ultimately benefit from your home whilst being happy for your partner to receive the rest of your estate.
As the name suggests, a life interest trust typically remains in place for the remaining life of your initial beneficiary. You can, however, create an interest for a set period, or until a certain event occurs.
Benefits of a life interest trust
Life interest trusts afford you control over the distribution of your estate. If you want to ensure that your partner has access to your assets during their lifetime, you could leave your estate to them absolutely. However, by doing so, you may also give away total control of those assets as when your partner dies, they could leave their estate to someone else entirely.
Trusting your partner to adhere to your wishes might not be enough. There are circumstances in which their estate could pass without their own control. In addition if your partner marries after having received your estate, that marriage would revoke any will they made previously, meaning that they could be left intestate without realising.
Aside from the effects of intestacy, life interest trusts can be a useful tool in protecting your assets from the bankruptcy or divorce of beneficiaries.
Some life interest trusts are created not to save assets for children, or other loved ones, but to protect vulnerable beneficiaries. You might want to leave your estate to a sibling who is unable to manage their own finances independently, or who is in receipt of means tested benefits.
Before making a will with a life interest trust, you should always seek professional advice as to the various implications.
How can we help?
Life interest trusts are an effective way of ensuring your estate passes as you wish, but you must make sure that the arrangement is appropriate.
Our solicitors can advise you on creating a life interest trust in a way that ensures your choices are clear and legally binding, as well as advising you or your trustees as to the requirements of managing a life interest trust.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.