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A life interest trust simply allows a person to benefit from a share in a property without actually legally owning that share in the property. If your intention is that you would want a person (“person A”) to live in your property but you would like to be able to control that when Person A dies (or at a different point in time) your part of the property would go to Person B and Person C, then you may wish to consider a life interest Trust.

Does how you own the property determine if you can include a life interest trust in your will?

Yes. In order to leave a life interest trust in your will you must either own the property in your sole name or own the property as tenants in common with one or more other persons.

What if I own my property as Joint tenants with another person?

If you would like to include a life interest trust in your will you would need to sever the joint tenancy to own the property as tenants in common. 

How many executors should you appoint when including a life interest trust in your will?

You should have at least two executors in your will when including a life interest trust (who would act as trustees of the trust).

When does a life interest trust end?

A life interest trust generally ends when the beneficiary:

  • Dies
  • Goes into care
  • Decides not to live in the property for a certain period of time 
  • Does not keep the property in good repair/condition 
  • The trust can be personalised to include other situations of when the trust would end, for example: If the beneficiary co-habits or remarries 

Benefits of including a life interest trust:

Example of how a life interest trust could protect your assets from care home fees:

Scenario:

  • Mr and Mrs Smith are married with two children
  • They each own 50% of their home which is worth £200,000 in total. 
  • Mr and Mrs Smith have £24,000 in savings in a joint account 
  • Mr Smith passed away in 2020 made a will which left his 50% of the property to his wife (or owned the property as joint tenants with his wife)
  • A year later Mrs Smith moves into a care home. 

Mrs Smith would be responsible to pay for her care home fees until her assets are less than £23,250 (based on current rules). If the cost of the care home was £40,000 per year then after 5 years the full value of the property would have been used to pay care home fees and their children would not benefit from the property or the value of the property at all.

Alternatively, if Mr Smith left his 50% of the property in a life interest trust, the trust would have ended when Mrs Smith went into care. Mr Smith could have stated in the trust that when the trust ends, his 50% of the property would be owned by his two children equally. Therefore, this would potentially protect £100,000 from care home fees.

Example of how a life interest trust could prevent your loved ones being disinherited

Scenario:

  • Mr and Mrs lane are married and have one child 
  • They each own 50% of their home which is worth £200,000 in total. 
  • Mr and Mrs lane have £24,000 in savings in a joint account
  • Mrs Lane passed away in 2020 and made a will which left 50% of the property to her husband (or owned the property as joint tenants with her husband).

If, during Mr Lane’s lifetime he decided to do one of the following things (the list is not exclusive) then their child would not benefit from the property or the value of the property at all:

  1. Re-marry and not write another will 
  2. Make another will disinheriting the child (perhaps due to a family disagreement)
  3. Make another will reducing the inheritance to the child and including other people
  4. Goes into care (as in above example)
  5. Sells the property and spends the money

If Mrs Lane had chosen to leave her 50% of the property in a life interest trust, she could have ensured that her child owned 50% of the property.  
 

Yes, this is possible. If the property is jointly owned by you and your spouse, it is essential that the property is held as tenants in common rather than joint tenants. It is possible that if you leave your spouse a life interest in your half of the property and your spouse subsequently goes into a care home that only half the value of the house would be taken into consideration by the local authority when carrying out an assessment. It is essential that the life interest trust is properly worded in the will and you should ensure, for it to be done properly, that you consult a specialist solicitor.