Life Interest Trusts

A Life Interest Trust gives someone an interest in a trust asset for the duration of their life and when that person dies, the assets pass on to someone else. The person with the interest for their lifetime is known as the life tenant. The person who receives the asset after the life tenant dies is known as the remainderman.

For example, a life interest trust gives £20,000 for the lifetime of A and on A’s death to B. This means that while A is alive, they will receive the income generated by the £20,000. On A’s death, the capital that remains passes to B. Therefore, B will receive £20,000 as there will not have been any growth on the money as A received all interest but the monies have been safeguarded to pass to B. A is not entitled to any of the Capital.

Life interest trusts are often incorporated into wills to deal with asset protection and to protect assets in a second marriage. They can also be used to try to protect assets in case someone goes into a care home.

If you have children from a previous relationship, it can often be quite difficult to know the best thing to do. You wish to provide for your new spouse while at the same time ensuring your children get the assets that you wish to leave them. If your new spouse was to remarry or has their own children, you would probably want to ensure that your assets pass back to your children. A life interest trust can help this happen.

Life interest trusts are a fantastic way of safeguarding your assets and passing on any inheritance. However, because of the complexities involved and the possible tax implications of placing assets within trusts, a professional must write them as any errors can cause the trust to fail.

Trusts can be very complex documents but can also be essential in order to ensure that the best possible solution is provided, to address all your concerns.

For more information download one of our helpful guides or give us a call on 01302 341414 for our Doncaster solicitors or 0114 272 1884 for our Sheffield solicitors.

What other types of trust are available?

There are numerous types of trust available, the most common types are: