If you want to leave your house to your children whilst ensuring your spouse or partner can continue to live in it, you may need to make a Life Interest Trust within your Will. Not having a Life Interest Trust can lead to problems, in some cases your children may never receive their full inheritance or your partner may be forced to sell the family home. This is not to say that a Life Interest Trust is a must for everyone, the most important thing is to make a professional Will before it’s too late. But in some cases, adding a Life Interest Trust to your Will can help to safeguard your children’s inheritance and your spouse or partner’s quality of life. In this guide, we’ll explain how a Life Interest Trust works, what the benefits are, and what could happen if you don’t make one.
How Does a Life Interest Trust Work?
Life Interest Trusts are commonly used to allow a surviving spouse or cohabitor to remain living in the family home whilst protecting it for the children in the future. For the remainder of this guide, we’ll use the word spouse, but the same applies to unmarried couples who own property together. You and your spouse have to be ‘tenants in common’ to make a Life Interest Trust, and typically you’ll own 50% of the property each. If, like many married couples, you are ‘joint tenants’, we can arrange the switch for you with the land registry at no extra cost. With a Life Interest Trust in place, your share of the property will be held in trust for your children when you die, rather than being transferred to your partner. However, your partner can continue to live in the home until he or she dies or remarries. The surviving partner can usually move house as long as he or she preserves the portion of your estate that is held in trust for your children.
What Are the Benefits of a Life Interest Trust?
The main two benefits of this type of trust are:
- It allows you to pass an inheritance on to your children whilst ensuring your spouse can still benefit from the assets(s) whilst he or she is alive.
- It potentially allows you to protect your children’s inheritance from being used for care home fees.
What Could Happen If I Don’t Make a Life Interest Trust?
Let’s have a look at a few scenarios that could play out if you don’t have a Life Interest Trust in place.
Scenario 1. If you die the family home could pass to your spouse. If your spouse then remarries, and in time he or she dies before his or her new spouse, the new spouse (who you may have never met) could inherit your family home and your children may not have any right to contest this.
Scenario 2. If you die the family home could pass to your spouse. If your spouse needs to move into a care home in the future, the full value of your home could be considered during means-testing and may end up being used for care costs – potentially leaving nothing behind for your children.
Scenario 3. If you and your spouse are ‘tenants in common’ and you each leave your share of the family home to your children (without a Life Interest Trust in place), when you die, they will immediately be entitled to half of the property – meaning the surviving spouse could be forced to sell the family home and buy somewhere worth half the value.
How Much Does a Life Interest Trust Cost?
For our up-to-date prices for Wills with Life Interest Trusts, please visit our price list.
The Bottom Line
Depending on your circumstances, it may be hard to fully protect your children’s inheritance as well as your spouse’s quality of life with a standard Will alone. If you leave your share of the family home to your children, your spouse may be forced to sell on your death to give them their share. However, if you leave your whole estate to your spouse, he or she may remarry in the future or be required to spend it on care costs, both of which can lead to your children never receiving their inheritance. Adding a Life Interest Trust to your Will allows you to pass on your share of the family home to your children in trust. A Life Interest Trust isn’t right for everyone, and we’re happy to discuss this option further with you so you can figure out if it’s the right choice for you.
At Michael Usher Wills & Estate planning we’ve been helping our local community for over 30 years. We’re regulated members of the Institute of Professional Will Writers, so you can be confident that you’ll receive a high-quality Will designed to protect your family’s future. Our friendly team is always happy to chat with you for free about your Will and answer any questions. Call us on one of the numbers below or book your FREE consultation here. We look forward to helping you protect your assets, your family, and your legacy.
Camberley: 01276 691979
