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Specifying a 'right to live' in your Will
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What is a life interest?

A “life interest” is where a person is given an interest in a property and/or other assets for life or for a shorter period of time. When that interest ends the interest “reverts” (passes) to other specified persons. Those other specified persons are said to have a “reversionary interest” in the property and/or other assets.

Life interests are also known as “interests in possession”.

The life interest granted may be a right to occupy a property or the right to receive income generated by a property and/or asset or may consist of both.

How can I grant a life interest to someone in my will?

When you make a will you can grant a life interest by setting up a trust in the will.

A trust is a legal arrangement used to protect assets, such as land, buildings or money for the benefit of the “beneficiaries” to the trust. Such assets are referred to as “trust property”. The person who sets up the trust is known as a “settlor”.

When setting up a trust you should appoint “trustees”. Trustees can be appointed in your will when you set up the trust. Trustees are legally responsible for the assets held in the trust and are required to manage the trust and carry out the wishes of the person whose assets were placed into trust.

When are life interests commonly granted?

Granting a life interest is a useful way of ensuring that someone is provided for during their life time and at the same time ensuring that when that person dies a settlor’s property and/or other assets pass to those he or she would wish them to pass to.

Life interests are commonly granted in the following situations:

  • Where a person would like their surviving spouse to have the right to remain in the matrimonial home until they die but would ultimately like their children to inherit their estate.

This guards against the possibility of the estate passing to a new spouse should the surviving spouse re-marry and then die before his or her new spouse.

  • Where a person has children but cohabits or is married to someone other than the other parent of the children and would like their surviving spouse or cohabitee to have the right to remain in the home until they die but would ultimately like their children to inherit their estate.

This guards against the possibility of the estate passing to the children of the surviving spouse and thus depriving the person’s own children from inheriting their estate.

As a person who is granted a life interest does not own the property and/or assets in which they have an interest such property and/or assets cannot be taken into account if that person’s finances are assessed for the purpose of care home fees. Similarly, such property and/or assets cannot be taken in the event that the person who is granted the life interest becomes bankrupt.

Other matters to consider when granting a life interest

Before granting a life interest in a property to someone you should consider whether that person can afford the upkeep of the house. You can set aside money for the upkeep of the house in your will or make provision for the upkeep to be paid from income producing assets. If that person has sufficient income of their own then the upkeep of the property may be less of an issue.

When granting a life interest you should also consider granting your trustees the power to sell the property and giving your surviving spouse or partner a life interest in a property purchased from the proceeds of sale. It may be that your surviving spouse or partner will want to move into a smaller property or move closer to their children if you die. Alternatively your surviving partner or spouse may have strong views about leaving their home.

There may be tax implications as a result of granting a life interest to a spouse or civil partner and appropriate advice should be taken.

When does a life interest come to an end?

Normally a life interest comes to an end when the person who has been granted the life interest dies. However, provision can be made in a will for it to come to an end at an earlier point, for example, if the person re-marries.

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