Life Interest Trusts
Discussion
Just getting round to doing our will and the solicitor has suggested a Life Interest Trust, so that if either my wife or I die, then our half of the house goes into a trust for the children and is released when we both die.
This potentially has two benefits
1. If my wife remarries, it stops stepchildren from getting hold of the entire estate
2. If one of us dies, and the other goes into care home, it stops the entire estate being eaten up by care home fees.
It seems too good to be true! I can't imagine local councils won't cotton on to this and see it as hiding assets.
Apart from the extra cost of setting up the trust, is there anything else I need to be wary of?
Thanks
This potentially has two benefits
1. If my wife remarries, it stops stepchildren from getting hold of the entire estate
2. If one of us dies, and the other goes into care home, it stops the entire estate being eaten up by care home fees.
It seems too good to be true! I can't imagine local councils won't cotton on to this and see it as hiding assets.
Apart from the extra cost of setting up the trust, is there anything else I need to be wary of?
Thanks
foiled said:
Apart from the extra cost of setting up the trust, is there anything else I need to be wary of?
Yes, who will be the Trustees of this trust? What advice have you received regarding the running costs of the trust?Why does the spouse need a life interest? Unless they live for ever the money's going to the kids anyway, just a few years later.
If you want to set up a family trust that can be done while you're alive using the £325k tax free band (which re-starts after 7 years). You would, off course, need cash money available to do it.
Creating a trust upon the first death is exactly what my parents did and exactly what we plan to do. IMO it cannot be viewed as hiding assets in the same way as the creation of a trust when the person is still alive because the assets belong to the deceased and they are passed on in line with their wishes.
As you have noted it also allows the assets to be protected in the event of re-marriage so it's not a case of hiding assets from the local authority it's about passing them on in line with the wishes of the deceased whereas doing it whilst alive and living in the property can easily be viewed as hiding them from the local authority.
I'm not qualified to give advice, just sharing my opinions!
As you have noted it also allows the assets to be protected in the event of re-marriage so it's not a case of hiding assets from the local authority it's about passing them on in line with the wishes of the deceased whereas doing it whilst alive and living in the property can easily be viewed as hiding them from the local authority.
I'm not qualified to give advice, just sharing my opinions!
SunsetZed said:
Creating a trust upon the first death is exactly what my parents did and exactly what we plan to do. IMO it cannot be viewed as hiding assets in the same way as the creation of a trust when the person is still alive because the assets belong to the deceased and they are passed on in line with their wishes.
As you have noted it also allows the assets to be protected in the event of re-marriage so it's not a case of hiding assets from the local authority it's about passing them on in line with the wishes of the deceased whereas doing it whilst alive and living in the property can easily be viewed as hiding them from the local authority.
I'm not qualified to give advice, just sharing my opinions!
IANAL either but this is what we have in place - house is owned as tenants in common with a 75/25 split due to divorces and relative cash used to buy house and our wills give the surviving spouse the right to live in the house or move to another one with same split - in effect a trust which only comes into effect when first one dies. When the survivor goes, then funds distributed in accordance with wishes, ie. My share to my kids, hers to her son. As you have noted it also allows the assets to be protected in the event of re-marriage so it's not a case of hiding assets from the local authority it's about passing them on in line with the wishes of the deceased whereas doing it whilst alive and living in the property can easily be viewed as hiding them from the local authority.
I'm not qualified to give advice, just sharing my opinions!
You can do the same on a 50 50 basis but key is that the house ownership is tenants in common
randytusk said:
Ive Benn told by patient of mine to do this. Only caveats are that thew council can still go after you for deliberate deprivation of assets and possible loss of the resident nil rate band as there is an intermediate trustee?
I think that the longer the time gap between the drawing up of the will to any care being required, the less the council can go after you.A caveat to consider:
It is my understanding that property in trust prevents the utilisation of a LISA / Other first time buyer bonuses for the recipient, so the inheritor may lose access to these.
I am the beneficiary of a trust setup within a similar arrangement, and whilst I’m by no means complaining, it does mean the LISA Savings which were intended for my own deposit etc. are now another pension pot unless I take the withdrawal penalty.
It is my understanding that property in trust prevents the utilisation of a LISA / Other first time buyer bonuses for the recipient, so the inheritor may lose access to these.
I am the beneficiary of a trust setup within a similar arrangement, and whilst I’m by no means complaining, it does mean the LISA Savings which were intended for my own deposit etc. are now another pension pot unless I take the withdrawal penalty.
ExBoringVolvoDriver said:
randytusk said:
Ive Benn told by patient of mine to do this. Only caveats are that thew council can still go after you for deliberate deprivation of assets and possible loss of the resident nil rate band as there is an intermediate trustee?
I think that the longer the time gap between the drawing up of the will to any care being required, the less the council can go after you.If these Trusts are so good why aren't they in everyone's wills or is it more prevalent for those that have remarried and have step children etc ?
As regards deprivation of assets iirc if a LA starts to investigate if they suspect money in the form of assets has been diverted they can still treat you as though those assets still exist ?
They can also put a charge on the asset whether its a part share or a total share.
A very quick online search gives both advantages and disadvantages but the common theme seems to be that they aren't necessarily a magic cure.
If on the other hand I'm wrong and they are would like to know how I should structure one !
As regards deprivation of assets iirc if a LA starts to investigate if they suspect money in the form of assets has been diverted they can still treat you as though those assets still exist ?
They can also put a charge on the asset whether its a part share or a total share.
A very quick online search gives both advantages and disadvantages but the common theme seems to be that they aren't necessarily a magic cure.
If on the other hand I'm wrong and they are would like to know how I should structure one !
SunsetZed said:
ExBoringVolvoDriver said:
randytusk said:
Ive Benn told by patient of mine to do this. Only caveats are that thew council can still go after you for deliberate deprivation of assets and possible loss of the resident nil rate band as there is an intermediate trustee?
I think that the longer the time gap between the drawing up of the will to any care being required, the less the council can go after you.Panamax said:
Yes, who will be the Trustees of this trust? What advice have you received regarding the running costs of the trust?
Why does the spouse need a life interest? Unless they live for ever the money's going to the kids anyway, just a few years later.
One common scenario is that they re-marry and some / all goes to the new spouse on death.Why does the spouse need a life interest? Unless they live for ever the money's going to the kids anyway, just a few years later.
ExBoringVolvoDriver said:
SunsetZed said:
ExBoringVolvoDriver said:
randytusk said:
Ive Benn told by patient of mine to do this. Only caveats are that thew council can still go after you for deliberate deprivation of assets and possible loss of the resident nil rate band as there is an intermediate trustee?
I think that the longer the time gap between the drawing up of the will to any care being required, the less the council can go after you.Panamax said:
Why does the spouse need a life interest? Unless they live for ever the money's going to the kids anyway, just a few years later.
There is no money, it's a house. The life interest is what gives the spouse the right to live in it until they die. The remaindermen (the children) own half the house and get it on death of the spouse. Panamax said:
The spouse already has the right to live there.
The house is eventually converted into money.
Why do you persist with posting like you know what you're talking about, when in fact you do not on a lot of stuff.The house is eventually converted into money.
Giving away half your share of a house without the life interest can lead to the new owner of that half forcing a sale to get their share as cash. The life interest gives them the right to the interest (which in this case is living there). Then the remaindermen only get the asset when the spouse dies, but it's effective at passing on ownership sooner.
PistonHead007 said:
Why do you persist with posting like you know what you're talking about, when in fact you do not on a lot of stuff.
Giving away half your share of a house without the life interest can lead to the new owner of that half forcing a sale to get their share as cash. The life interest gives them the right to the interest (which in this case is living there). Then the remaindermen only get the asset when the spouse dies, but it's effective at passing on ownership sooner.
Show us one, just one instance of a spouse who owns half a house getting ejected after death of the other spouse. Come on, where is it?Giving away half your share of a house without the life interest can lead to the new owner of that half forcing a sale to get their share as cash. The life interest gives them the right to the interest (which in this case is living there). Then the remaindermen only get the asset when the spouse dies, but it's effective at passing on ownership sooner.
Anyone might think you're one of the vultures collecting fees from scaring the gullible. A giant amongst the pygmies. There's nothing quite like a "professional trustee" role to keep the fees rolling in and the beneficiaries waiting for years...
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