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If you are considering the future protection of your family, you may be familiar with something called a Life Interest Trust. But let’s consider, what exactly is a Life Interest Trust and how has it become such a key part of families’ estate planning today?
At Will 4 Less we know that estate planning is not just about dividing up your assets, it’s also important to make sure the right people receive these at the appropriate time, with guarantees for inheritance. https://amersham.wills4less.co.uk/life-interest-trust//
Life Interest Trust (also known as an ‘Interest in Possession Trust’) With a Life Interest Trust you can place your assets for the benefit of future beneficiaries, but also provide financial security to those that matter most to you in your lifetimes.
For instance, most will create a Life Interest Trust, allowing their partner to remain in the house that they owned together until they also die but only when it is passed on to the children.
This is one of the biggest reasons people seek info on an Interest in Possession Trust – they want to ensure security for a partner, and inheritance protection for their own children.
Our attitudes are shared by many of our clients who express the following concerns:
Such natural concerns are overcome by providing the Life Interest Trust:
A Life Interest Trust can have lots of benefits, particularly if you want to look after current and future generations.
Your partner won’t be kicked out of the house when you’re dead. They have a legal right to live there for life (or as long as they want to).
When your partner dies, your children (or other named beneficiaries) can inherit without incurring any tax liability. This eliminates uncertainty, and secures their own future.
Should your partner go on to require residential care, the property (or a share of it) held in the trust might not be taken into consideration for their estate – potentially guarding family wealth.
Without a Life/Possession Interest Trust, your surviving spouse could remarry and even change their will, with the result that your children get nothing. This trust prevents that scenario.
Types of people that opt for a Life Interest Trust include:
Marrieds and long-termers with children from previous relationships.
People who want to ensure their partner can’t inherit everything if they remarry, and that their children can still have a financial stake.
Homeowners who want their spouse to have a house for life, yet pass the property down their bloodline.
Clients who are worried about the cost to their estate of care home fees (although this is a specialist area and requires specific advice).
Whilst you were thinking about making your Will and considering how best to provide for those that you care for, you may have seen reference to two similar terms: Life/Possession Interest Trust and Flexible Life Interest Trust. Although they might sound the same on the surface, they fulfill distinct roles and provide varying degrees of flexibility for your family’s future.
A Life/Possession Interest Trust is very simple. It effectively grants someone (frequently your husband or wife) the ability to benefit from an asset (typically that’s half the family home or your investments) for the remainder of their life.
For example:
Key Point: Protects your children’s inheritance yet takes care of your spouse during his or her lifetime.
A Flexible Life Interest Trust The Flexible Life Interest Trust begins in the same way as the standard Life/Possession Interest Trust. The person you designate gets income or use of the asset for his or her entire life. But it’s referred to as “flexible” because the trustees have extra powers to change who benefits and when.
For example:
Key Point: Offers flexibility to accommodate changes in family needs, tax considerations or other circumstances after your death.
Determining whether or a Life/Possession Interest Trust is appropriate for you is the function of your family, financial, and emotional factors. Many are trying to strike the balance between taking care of their partner and securing their children’s future.
A Life Interest Trust including a reversionary interest will ensure that your needs are met and give you peace of mind.
At Will 4 Less, we are experts in helping families navigate this crucial decision with understanding and skill. If you are considering a Life/Possession Interest Trust in your Will (or would like to understand more about it), or want to know what is available.
Get in touch today and we’ll make sure you feel knowledgeable, confident, and comfortable with your decisions for the people who matter most.