Life Interest Trust: How to keep your property in the right hands after death

Making sure that your property ends up with the right people after your death is a concern for most of us, particularly in the context of a second marriage or children who may not get on.

Setting up a Life Interest Trust is a safe way to ensure that your property ends up in the right hands after you die. A standard Will might leave your estate to your surviving partner, with your partner’s estate then going to any children from your relationship.

But, there is no guarantee that on your partner’s death the children will receive the estate. A Life Interest Trust gives you the power to specify who owns the rights to your property, protecting your family home and other property regardless of future developments.

To explain the importance of a Life Interest Trust and how it could work for you, we’ll use an example of a married couple, John and Mary.

What’s the situation and how will Life Interest Trust help?

John and Mary are a married couple with two children. They have a Will that stipulates when one of them dies the survivor will inherit the estate. Following the surviving partner’s death, the children will take over the reins as Executor, inheriting the estate equally.

However, it is not uncommon for people to remarry after a partner’s death. In our example, Mary re-marries Chris. In this case Mary does not make any change to her original Will.

This means that when Mary dies her estate, including what she has inherited from her first husband John, will go to her second husband Chris, unless she’s made a new Will to include the children from her first marriage.

This situation (which is not uncommon) can create several complications. For example, if one of the children is from John’s first marriage, Mary could change her will to leave everything to her second child with John. Chris might also decide to change his will, including the inherited estate, to leave the children out.

When John is considering the future of his estate, these changing factors need to be considered. A good reason to look at a Life Interest Trust very seriously.

How can a Life Interest Trust protect my estate?

You don’t want to find yourself with the complications mentioned above. If you want to avoid the issues that John could face with his estate, you could arrange for the estate of the first to die to be left in a Trust. This is known as a Life Interest Trust and would give the survivor the following rights:

1. Gain an income from the deceased’s invested estate. For example, off rent, dividends, interest and the like;
2. Live rent free in the property owned by the deceased.

Under this arrangement, the Will of the first to die would state how the Trust fund should be inherited following the death of the survivor.

This agreement allows for the surviving partner to benefit from the estate of the deceased while also protecting the future interested of any children, or other family members.

How could a Life Interest Trust work in practice?

A couple’s home is often the point of most complication following a death, and the most common aspect of an estate to be left in a Trust. Consider this situation with another couple.

Jane and Michael are married and have both been married before. They both have children from a previous marriage. They jointly bought a house and they also have individual savings.

They create Wills leaving their share of the house to a Life Interest Trust, with the rest of the estate going directly to the survivor in its entirety. To protect both children in future the Life Interest Trust states that on each of their deaths the individual share of the house will pass to the child from the previous marriage.

This means that each share can be inherited by the children in the future. Each Will states that the surviving partner can live in the property rent free and that they are responsible for the properties outgoings, insurance and maintenance (to keep the property in good condition).

This Will also states that the house could be sold with the proceeds from the deceased’s share being able to be used to purchase all or part of a new property. This is to be held in the same terms under the Trust.

The rest of the deceased partner’s estate, the savings, is available to be used.

In this example, the Life Interest Trust protects the surviving partner and ensures that each of the children will eventually see some inheritance from the estate, no matter the circumstances moving forward.

Our advice?

Each relationship is different and will bring with it a distinct set of challenges when it comes to protecting your estate for the future. However, in most cases, a Life Interest Trust is well worth considering, as it will give you the peace of mind that your loved ones will receive what you want them to.

For further information, or to discuss your particular situation please contact us, we’re here to help.

Please note that all views, comments or opinions expressed are for information only and do not constitute and should not be interpreted as being comprehensive or as giving legal advice. No one should seek to rely or act upon, or refrain from acting upon, the views, comments or opinions expressed herein without first obtaining specialist, professional or independent advice. While every effort has been made to ensure accuracy, Curtis Parkinson cannot be held liable for any errors, omissions or inaccuracies.

Partnerships & Accreditations