What Is A Life Interest Trust Will?
A Life Interest Trust is a trust in your Will designed to protect your share of the family home against re-marriage or the long-term effects of care fees. Life Interest Trusts are designed to help where a property is jointly owned and is particularly useful where there are children from previous relationships.
What Does A Life Interest Trust Do?
Life Interest Trusts protect your share of the family home for your chosen beneficiaries (i.e. your children), whilst allowing your surviving partner to remain living in the family home for the rest of their life, or for as long as they wish to. If the survivor doesn’t want to stay in the family home, then it can be sold and the money will be invested with the income being paid to the survivor during their lifetime. Alternatively, the survivor might decide to rent the property and they will be entitled to the rental income. The trust protects the capital of your share of the family home for your chosen beneficiaries.
Will This Happen Anyway?
No, in order to protect your share of the family home, you will need to include a Life Interest Trust in your Will.
Most couples who own the family home jointly will own it as joint tenants. This means that when one of the co-owners dies, the property will pass automatically to the surviving co-owner, regardless of what your Will says. If this happens then the family home will become 100% theirs and they can dispose of it as they wish.
This could be problematic if they need long-term care, or if they remarry, as your share of the family home could be used to pay for that care or become an asset of the new marriage, and therefore not be available to your chosen beneficiaries.
You will also need to alter your ownership of the property from ‘joint tenants’ to ‘tenants in common’ which means that your share in the family home pass under the terms of your Will.
What Happens When I Die?
When you prepare your Will, you will be asked to identify Trustees. Trustees are people who you trust implicitly to look after your assets for the benefit of others. Your Trustees will be responsible for managing your share of the family home and they will need to allow your surviving partner to remain in the family home undisturbed and in compliance with the terms of the trust.
Can I Sell The Family Home During My Lifetime After I’ve Made My Life Interest Trust Will?
Yes, but you need to ensure that you own the new property as tenants in common so that the terms of the Life Interest can apply to your new home.
Can My Partner/Spouse Sell The Family Home After My Death?
Yes, the trust allows for the survivor to sell the family home and buy a new property, which will be held on the same terms. If the property is cheaper, then any surplus cash will be invested to provide an income for the survivor, whilst the capital is still protected for your chosen beneficiaries.
Should I Give My House To My Children During My Lifetime?
Whilst you can do this, it is not advisable due to the potential Inheritance Tax consequences for you and the Deprivation of Capital Rules (rules about giving away your assets that ought to be used to pay for care). Additionally, you can also put your security to live in the family home at risk if any of your children were to divorce, die or become bankrupt.
Who Can I Speak To About Preparing A Life Interest Trust Will?
If you have any further questions, or if you would like more information, please contact me on 01530 564498 or m.lovell@timms-law.com