Can a life interest trust protect my children's inheritance?

Abbie Kingdon  16-01-2019

If you wish to protect the value of your share of your family home for your children then a life interest trust could be the answer for you. 

If you are concerned about your partner remarrying or entering in a civil partnership (“CP”) after your death, or if you have remarried or entered into a CP yourself, and have children from a previous relationship then this type of trust could be particularly beneficial for you.

How does a life interest trust work?

A life interest trust must be included in your Will so that on “first death”, the first spouse or CP’s share of the property goes into trust.

Under the terms of the trust, the surviving spouse would have the right to remain in living in the property for the rest of their life but they can move if they wish to do so, for example if they want to downsize. 

If the surviving partner downsizes, there could well be a surplus of cash. This cash will form part of the trust and would need to be invested by the trustees named in your Will. 

The trustees would also be required to pay the income from any such investment to the surviving spouse or CP. However, the capital would be preserved for your children who would inherit on the survivor’s death.

What are the advantages?

Through the mechanism of a trust, you are able to control the ultimate destination of your assets, whilst still providing a degree of flexibility for your surviving partner.

Importantly, the survivor can release cash by downsizing if required. 

It is unlikely that the share of the property held in trust would be clawed back to meet the costs of the survivor’s care, if that was required in future. 

Do you need to set up a trust?

If you would like some further information or you would like to discuss setting up a life interest trust, please do not hesitate to contact our private client department who will be happy to discuss this further with you.