Life Interest Trusts
Wills & Estate Planning
Life Interest Trusts Newcastle
What is a Life Interest Trusts or Blended Family Will?
Our Wills & Estate Planning Lawyers in Newcastle can advise and assist with testamentary life interest trusts. A ‘life interest’, as the trust is otherwise known, can be created by a will and enables you to support a beneficiary after your death for a period of time. The beneficiary entitled to the life interest, called the life tenant, is often entitled to receive the benefit or a property or assets during their lifetime, or a period of time chosen by you, after which your estate is distributed to other beneficiaries in accordance with your wishes.
These types of trusts are most often used to provide for a spouse during their lifetime, with the assets passing to your children upon your spouse’s death.
If there is a property in a life interest will trust, the life tenant may be entitled to live in the property or to receive the rental income from it for the rest of their lives. In some instances, the trustee may allow the property to be sold and a new one bought for the life tenant to live in during their lifetime. This would allow them to downsize or relocate following the death of the testator.
A life interest trust can be an effective way of ensuring that your spouse or partner is able to carry on living in the family home whilst passing the value of the property onto other beneficiaries when your spouse or partner dies. They can also be useful to control the final destination of your property and ensure that your beneficiaries are provided for after your death, giving you peace of mind that their inheritance is safe from interference from any future hostile creditors such as bankruptcy, divorce or long term care costs.
Right Of Residence Clauses
Right of residence clauses are suitable for Blended Family Wills. In blended families a testator may wish to allow their new spouse to live in their residence for the rest of their life and then have the property eventually pass to the children from their first marriage.
There are two different types of life interest trusts – ones that create a Life Estate and ones that provide for a Right of Residence which allows someone to reside in the property provide they pay the rates and insurance and maintain the property.
These wills are particularly useful for Blended Families – where there are children from the first relationship. The risk is if the whole estate is gifted to the new partner, then when they die they could pass it to their children or a new spouse, meaning that the children from the first relationship miss out on any inheritance. Life interest clauses help prevent this and are highly recommended where a testator has children from a previous relationship. Otherwise, stepchildren can be left in a vulnerable position where they are left without any inheritance.
The advantage of a blended family will is that the new spouse can be provided for, while at the same time ensuring their stepchildren eventually get to benefit from the assets upon their passing.
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When considering who owns the property in a Life Interest Trust, it is important to understand that your “life tenant” will have the right to occupy your property and potentially receive income without having the right to the capital. This means that you can allow someone to remain living in your property after your death until they die, remarry, cohabit or until the end of a designated time period chosen by yourself. At the end of the Life Interest Trust, the legal ownership of your share of the property can then be transferred to your chosen beneficiaries.
The trust will allow your spouse to remain in the property for the remainder of their life, and they will also be responsible for keeping it insured and in good repair, but the capital will ultimately go to your children on the death of the surviving spouse.
The will can state that the life interest should come to an end if the life tenant should marry or enter into a de facto relationship.
Our specialist wills and estate planning lawyers in Newcastle are highly experienced in drafting wills to suit blended family situations, to ensure that all your relevant beneficiaries are adequately provided for and minimise the risk that your will is contested after you pass away.