Life Interest Will Trust – Briefing Note
What is it?
This is a means whereby husbands and wives can each leave part or all of their assets to the survivor of them with the protection of a very simple Trust. The Trust can cover all assets or a specific asset (usually your 1/2 of your jointly owned Property)
What are the advantages?
The assets left into the Trust are ‘ring fenced’ from the survivor’s assets. this means that for situations where monies could be depleted, such as care home fees or a second marriage, the value of the assets in Trust are protected for the benefit of the ultimate beneficiaries (e.g children)
The survivor receives a Life Interest in the asset or investment meaning that, for Property, s/he continues to enjoy the Property exactly as when you jointly shared it. For investments, s/he receives the income produced.
What are the disadvantages?
There is no absolute gift to the surviving spouse and some spouses dislike the idea of the assets being held by the Trustees. There are also formalities required in transferring the assets when the Trust comes into force.
Will the survivor be subject to the wishes of the Trustees in relation to the Property?
No, the Trustees cannot undertake any transaction regarding the Property without the written consent of the Life Tenant, meaning the Life Tenant retains control over their living arrangements.
What if the survivor wanted to move house?
The terms of the Life Interest give the survivor the control over how the assets are utilised, for example allowing them the right to change to a different Property or downsize and have the surplus cash invested to produce an income.
Will I have to leave money to pay for the upkeep of the Property in the Trust?
No, while the Life Tenant is in occupation of the Property they are liable for its upkeep and all costs relating to the Property, such as Insurance.
What are the requirements for the assets to be placed into the Trust?
Investments must be held in your sole name at the time the Will comes into effect and, in relation to your Property, the joint tenancy will need to be severed by a simple document declaring a tenancy in common in (usually equal) shares.
The Trust is designed to protect the assets against the burden of costs which may arise, such as care home fees, to ensure that they are preserved from the benefit of the ultimate beneficiary, whilst still giving the survivor the use and enjoyment or income from the asset.
As it is a Will Trust, it has no effect until you die. This means you are not making any gifts now and you can change the arrangements at a later date if you wish. It can also be adjusted prior to your death if there are future changes in legislation which would affect its operation.
The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances. (50587)