Life Interest in Possession Trusts

How does it work?

Rather than giving everything outright to your spouse (for which read, your spouse, partner or civil partner), your will gives your share in your home to a trust.  Your spouse in this context called a Life Tenant, is able to carry on living in the house for life or until their remarriage.  During that time, if they wish to move they can do so, and the trust then applies to the new property.  If they prefer to rent the house out, they can do so, and they’d receive all of the net rental income.  So the advantage to the spouse is that they have a home for life, but ultimately the first-to-die’s share will still pass to their preferred beneficiaries, usually their biological children.

• If the surviving spouse falls out with their step children, they can’t give all of the value of the property to anyone else (such as their own children) because the trust owns half of the property on behalf of the children of the first-to-die.
• If the surviving spouse goes into a care home the local authority will carry out a means assessment, but because they only own half of the property, the other half is protected by the trust for the benefit of the children.
• If the surviving spouse remarries, then automatically the existing will is revoked on that wedding day. If they die, their new spouse automatically receives the majority of the joint estate, unless the surviving spouse remembers to make a will at that point.  Having the life interest trust in place, however, means that that remarriage automatically ends the trust and so the first-to-die’s children become the outright owners of that first half of the value of the house, so they can sell it and receive half of the proceeds.

What needs to happen?

• If you would like more information about whether a life interest trust would be best for your circumstances, we can discuss further.
• It’s essential that a life interest trust applies to a property which is held as tenants in common, rather than joint tenants, and so Marlow Wills will search the Land Registry records and, if the house is currently owned as joint tenants, we will arrange to sever that so that each of you owns half of the house as tenants in common.