Life Interest Trusts
What is a Life Interest Trust?
A life interest trust is a trust which provides that the income of a fund are to be used by trustees for the benefit of one beneficiary, usually known as a life tenant, until a triggering event (usually death) after which the assets are distributed to another set of beneficiaries. If a property is held on a life interest trust the life tenant has the right to occupy the property for their lifetime without being required to pay rent. For most of us the only reason we would contemplate a complex will would be if it gave us a tax advantage but there are other considerations.
Succession Life interest Trusts are an important part of asset planning if you or your spouse have previously married or you have a family with children from different partners. Life Interest Trusts for example can be used to allow a spouse to live in your house for their lifetime and thereafter for the house to be sold and the proceeds divided amongst your children. A life interest trust is used where a straightforward Will may not provide the outcome of your wishes after death.
For example a Straightforward Will may not be appropriate as your children may not inherit from your second spouse if he or she left everything to his or her own children. Similarly it would not be fair to leave everything to your children in your will as your second spouse would have to leave their home and face the possibility of having nowhere to live.
Nursing Home Fees
In the case of nursing home fees if you were to leave your half of all joint assets to a trust rather than directly to your spouse then this would ensure that at least this half was protected and could be inherited by your ultimate beneficiaries. If after you died your spouse went into a nursing home and the property had to be sold only half the proceeds would belong to your spouse (assuming it is in joint names) and the other half would belong to the trust. The trust could ensure that this half would not be used to pay the fees and only the income would be paid out.
We hope you find this Information Guide helpful but it is only intended to give a brief outline of the topic and should not be relied on as a basis for action. We would be happy to give you more detailed advice based on your individual circumstances. If you have an enquiry about Wills or Trusts, contact us today to find out how we can help. We are happy to see clients at any of our offices.