What Is a Life Interest Trust?

A life interest trust lets one person benefit from an asset — usually the right to live in a home — for the rest of their life, while making sure the asset itself eventually passes to people you have chosen.

What is a life interest trust?

A life interest trust separates the right to use something from the right to own it. The person with the "life interest" (often a surviving spouse or partner) can live in a property, or receive the income from an investment, for the rest of their life. When they die, the asset passes to the people you named when you set up the trust — your chosen beneficiaries, often your children.

This is one of the most popular trusts for blended families, because it provides for your partner now while protecting your children's inheritance for later — even if your partner later changes their own will.

When is a life interest trust useful?

• Second marriages and blended families, where you want to look after your spouse but guarantee your own children inherit
• Protecting a home for a partner without risking that it later passes to someone outside the family
• Providing an income for someone for life, with the capital preserved for the next generation
• Keeping arrangements relatively simple and easy to understand

How it works in your will

Typically each partner leaves their share of the family home (or other assets) in a life interest trust rather than outright. The survivor keeps the right to live there for the rest of their life. A well-drafted trust also lets them move or downsize later, so it can adapt to circumstances while still protecting the children's share. On the survivor's death, the asset passes to the chosen beneficiaries.

Things to consider

• Decide who the trustees are — they make sure both the person with the life interest and the eventual beneficiaries are treated fairly.
• Think about flexibility: a trust that allows the survivor to move or downsize is usually more practical.
• It is worth understanding how a life interest interacts with inheritance tax.

A life interest trust is one of several trusts you can include in a will — others include the discretionary trust and the vulnerable person's trust. Our guided questionnaire can set up common trusts, and every will is checked by a qualified solicitor. For more complex arrangements, book a call with our team.