Life Interest Trust
A trust giving one person the right to benefit from assets during their lifetime, after which the assets pass to other beneficiaries.
A life interest trust (also called an interest in possession trust) splits the benefit of assets between two sets of beneficiaries:
- Life tenant: Has the right to benefit from trust assets during their lifetime (e.g., live in a property or receive income)
- Remaindermen: Receive the capital when the life tenant dies
Common Uses
Second marriages: Provide for a surviving spouse while ensuring children from a first marriage ultimately inherit.
Property protection: Spouse can live in the home for life, but it passes to children afterward rather than the spouse's new partner or their family.
Example
John leaves his house in a life interest trust. His wife Mary can live there for the rest of her life. When Mary dies, the house passes to John's children from his first marriage.
Tax Treatment
- Trust assets form part of the life tenant's estate for IHT
- When the life tenant dies, IHT is calculated on the trust assets
- Income from the trust is taxed as the life tenant's income
Common questions
Can the life tenant sell the property?
What happens if the life tenant needs care?
Is a life interest trust the same as a property protection trust?
Compare estate planning quotes in 2 minutes
See up to 4 matched verified UK planners, ranked cheapest-first. No obligation, no hidden fees.