The most common way for couples to make Wills is to leave all of their assets to each other on the first death, and to their children on the second. While there is nothing wrong with this structure, it can sometimes cause problems and lead to unintended consequences in the future, such as all of your wealth going towards expensive care fees or passing to other people if you die before your spouse. One way to build some protection for your loved ones is by incorporating a Life Interest Trust into your Will.
A Life Interest Trust is a legal entity that effectively ringfences the chosen assets belonging to the deceased, and places them into a trust for the benefit of chosen individuals. The most common use of this would be to place the deceased’s share of the family home into a Life Interest Trust for the benefit of the surviving spouse. The Life Interest Trust comes into effect on the death of the first spouse and places the deceased’s share of the property into trust. The surviving spouse has the right to continue living in the property under the terms of the trust for the remainder of their life, without inheriting the deceased’s share outright. When the surviving spouse re-marries or dies, the Life Interest Trust comes to an end and the share of the property which had been in trust would pass in accordance with the first deceased’s spouse’s Will.
Advantages of a Life Interest Trust
- Ensuring that the surviving spouse can stay in the property and is adequately provided for.
- Controlling the ultimate destination of your assets; As the surviving spouse does not actually own the deceased’s share of the property that is in trust, they cannot change the ultimate beneficiary of this share – even if the surviving spouse meets a new partner or remarries after the first death. Therefore, the Life Interest Trust ensures that the share of the property passes to the chosen beneficiaries, such as your children.
- Avoiding your wealth being used up in expensive care fees; If the surviving spouse needs residential care, the share of the property in trust will not be taken into account in assessing contributions to care fees, as the share does not belong to them. This way a couple can ensure that at least half of the value of their property can be preserved for their children, rather than it all being used up paying care fees.
- If any of your children, or such other ultimate beneficiaries of the Trust, were to die before you, be made bankrupt or get divorced, then the trust would ensure the surviving spouse would not be affected by this. They would continue to have rights under the trust for the rest of their life and would be able to continue living at the property.
Deciding whether to include a Life Interest Trust in your Will is something couples should think about carefully, depending on their family circumstances and priorities. For the purposes of this article, spouses have been referred to, although it can equally apply to co-habitating couples and same sex partners. Setting up a Life Interest Trust as part of your Will can unravel several layers of legal issues, including changing your title deeds. If you think a Life Interest Trust is a good option for you, contact our team of Specialist Solicitors today on 01244 312 306.
