A life interest trust is a trust written into a will. This means that the trustees hold the assets in the trust on behalf of the beneficiaries. Life interest trust wills are special because there are two types of beneficiaries. Then there are the ‘remaindermen’, who get the property once the trust arrangement ends.
Is a flexible life interest trust a discretionary trust?
Back to BasicsEstate PlanningTrustsWillsBack to Basics – Flexible Life Interest Trust (FLIT) However, on the death of the life tenant, the trust automatically turns into a discretionary trust and is therefore treated as a relevant property trust.
How is a life interest trust created?
A testamentary life interest trust enables you to support a particular beneficiary after your death for a period of time chosen by you. A testamentary trust may be created using specified assets, a designated portion of your estate or the entire remaining balance of your estate.
Who are the trustees of a life interest trust?
The trustees are the legal owners of the trust property, but are bound by law to make sure than the beneficiary or beneficiaries receive the benefit of the property.
What is the difference between a life interest trust and a discretionary trust?
A life interest trust is also referred to as an interest in possession trust. A life interest trust differs from a discretionary trust in that under a discretionary trust the trustee can decide whether to pay the income or gift the asset to one, some or all the beneficiaries, whilst they can even retain the income.
What happens when a life interest trust ends?
If the trust is brought to an end during the Life Tenant’s lifetime so that the trust assets can be paid to other beneficiaries, the Life Tenant is treated as having made a Potentially Exempt Transfer (PET) for Inheritance Tax, equivalent to the capital value of the trust.
Why is a flexible life interest trust important?
Flexible Life Interest Trusts (FLITs) are sometimes described as “the ideal modern family trust.” The reason for this is because it allows a person to benefit immediately on the death of the testator while at the same time protecting the assets for others i.e. the children.
Who is a beneficiary of a flit Trust?
A FLIT arises when a beneficiary, normally a surviving spouse, is given a life interest in the assets contained in the estate. The trustees have the power to pay income and often capital to the life tenant.
How does a trustee work in a life interest trust?
The trustees hold the assets and pay any income to the survivor for the rest of their life. The survivor has a “life interest” in assets and this can also be a right for them to occupy any property within the estate for their lifetime.
Who is the best person for a life interest trust?
Life interest trusts are good for anyone who wants to protect their children’s inheritance of their share of the family home. They are best for couples who are married or in a civil partnership, who want to protect their assets for their beneficiaries, but also leave the surviving spouse with a life interest in the property.
