• If you have children from a previous relationship, a life interest trust can ensure that your new partner/spouse can enjoy your assets for the rest of their life and then they would pass to your children. Unlike an outright gift your spouse/partner can’t alter the ultimate destination of the gift.
• If you don’t have children, but your spouse/partner does, you may have relatives, friends or charities who you would like to benefit from your estate after your spouse/partner has died. A life-interest trust may be the solution for you.
• When using a life-interest (property trust) it is still possible for the survivor to move home.
Protecting your children and your new partner/spouse
When you have children from a previous relationship you may have conflicting requirements when it comes to making a Will. You may decide to leave something to your children and something to your new partner/spouse, but more commonly it’s a bit more complicated than that.
Often you and your new partner/spouse will have invested in a home together or pooled your resources in some way. You will be keen for this to continue if you die, but you would not be keen for them to spend ‘your money’ before their own or see them give ‘your assets’ to their children or a new partner.
Ultimately you want them to be able to continue living the life that you have made together, but those assets are to ultimately end up with your children. Equally, if one of you doesn’t have children, you may want to ensure that your partner/spouse can carry on enjoying your assets, but that your assets ultimately end up with friends, siblings or a charity.
A Life Interest Trust (or property trust)
In this scenario it is very common to use a life interest trust or a property trust to ensure everyone’s interests are looked after. The terms on which someone inherits something is flexible and by choosing the right trustees you can ensure that everyone’s interest are protected.
Specifically a Property Trust is very commonly included in a Will where one or both parties has children from a previous relationship.
Here's an example of how it could work:
John & Sarah have married after meeting five years ago, they live together in a house that they both own a 50% share in. They both have one child from their previous marriages.
They decide to place their share of their home in flexible life interest trust which will be included in their Will. The survivor will be the ‘life tenant’ and their child will be the beneficiary. It will mean that when the first of them dies:
• The survivor will be able to carry on living in the property for the rest of their life.
• The survivor will be able to move home if they wish.
• The survivor could move out of the house and benefit from the rental income generated.
• Their child’s share of the property is safeguarded and cannot be left to somebody else if the survivor changes their Will.
• Nothing changes about the way the home is owned whilst they are both alive.
• When the survivor dies, the trust ends and the child inherits their share of the home outright.
The terms of the trust are very flexible – for example, it could end if your partner remarries or it could allow for capital to be forwarded to the life tenant. You can also include investments and other assets, not just your home.