Safeguarding your family home with a Life Interest Trust

Insights / / Bristol

Amy Nunn, Associate in our Private Client team, explains how setting up a Life Interest Trust can safeguard your most valuable asset: your family home.

What is a Life Interest Trust?

A Life Interest Trust is a type of trust commonly used for care fee planning and in cases where there are children from multiple relationships.

It is mostly used by couples to protect assets held in trust, such as a share in the family home. This trust is often incorporated in a couple’s Wills and enables a couple to ensure that in the event of one of their deaths, their share of the family property will be held in trust for the benefit of the survivor. For this to apply the residence must be owned as ‘tenants in common’.

How do they work?

By having a Life Interest Trust in the Will, on the first death, the assets will be protected and will not be taken into account by the local authorities when assessing the survivor’s capital for care funding. If the survivor later had to go into care, the survivor’s own share of the property will be used to fund their care while the other half will be protected in trust.

In addition, it is possible to draft the Life Interest Trust in a flexible way so that on the first death, the survivor has the right to remain in the property for their lifetime. At the end of the Trust period, the property could pass to the chosen beneficiaries under the Will, which could be the children.

The Life Interest Trust can also apply to other properties if the survivor decides to move to a smaller property, also known as downsizing.

Trustees will need to be appointed to administer and deal with the Trust. It is important to choose your trustees carefully as trustees must act unanimously.

What are the benefits of having a Life Interest Trust?

Life Interest Trusts can meet your specific needs and circumstances. For example, additional clauses can be included to provide more flexibility and protection, such as a power to authorise the trustees to purchase another property, to invest the surplus of the deceased’s share for the survivors benefit, to advance or lend capital to the survivor and for the deceased’s share of the proceeds of sale to be invested to produce an income for the survivor if they are unable to live in the property.

How can we help?

Our Private Client department offers Wills, Probate, Tax & Trusts services, including making a Will, creation of Trusts, Lasting Powers of Attorneys and Inheritance Tax planning.

We specialise in preparing Life Interest Trusts for our clients to meet their particular needs. We can review the way your property is owned and sever your joint tenancy if necessary.

If you would like to know more, please do not hesitate to contact us.

We offer a 30-minute free consultation and we will be pleased to discuss your personal and financial circumstances with you so that we can provide you with the best advice.

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