What Is A Property Lifetime Interest Trust?
When written into a Will the trust clause “Property Lifetime Interest” grants a Lifetime interest in part of an estate. Most frequently this a property in the form of the main residence/family home.
When considering using such a clause. It is important to first consider the tenancy basis on which the family home is registered with the land registry. Often family homes are purchased and registered on a Joint Tenants basis, if this is the case using a Property Lifetime Interest clause to give away part of the family home will not work.
This is because, in the event of the death of one partner. The surviving partner automatically becomes the sole owner of the property irrespective of what has been written into their Wills.
In certain circumstances, people may decide to buy and own a house as Tenants in Common. This means that each partner does own a separately identifiable share which can be gifted upon trust independently of the other partner.
It is also possible to change the tenancy from that of Joint Tenants to Tenants in Common. This would be a deliberate severance to permit the individuals share to be given away in their Will.
A change of tenancy can create as many problems as it solves and will depend on whether there are beneficiaries in addition to the spouse. This is because in some cases a surviving spouse or partner may have to sell the property for other beneficiaries to receive their share.
Careful consideration should always be given regarding the potential consequences of trying to arrange a lifetime interest trust for the surviving partner.
It is possible for the gift of a share of a property to be conditional on the survivor being allowed to live there but it does reduce the ability of the occupant to realise the equity value of the property.
This can have the effect of leaving elderly people more financially disadvantaged than they would have been had they inherited their partner’s Estate absolutely.
There are however circumstances when this arrangement would be beneficial.
For example, two older testators may share a house they could both be widowed and it may be a late second marriage or partnership.
In such a case both Testators may have owned a house, one being sold so that they can share one residence. In this situation, it is most likely that both of them will wish their individual estates eventually to pass to the children of their own first marriages.
In this situation, it would be suitable for the owner of the house to grant the partner a lifetime interest in the property.
In some cases, couples choose to sever the tenancy of their property and not inherit absolutely in the attempt to reduce the liability of future care home fees costs. careful consideration to deliberate deprivation of assets must be given when considering such planning.