There are things you can put within your will to help protect and preserve your assets to pass down to your family. There are ways of protecting your spouse, at the same time, avoiding inheritance tax bills.
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The setting up of a Life Interest Trust in a will can be a useful way of protecting assets. The most common way would be to create a Will which includes a Life Interest Trust specifically in relation to your home or property.
This usually enables you to give your half share of your home to your children whilst still allowing your spouse to reside in the property rent free for the rest of their life. Setting up a Life Interest Trust in wills can provide benefits either to preserve assets for your children or grandchildren, protect vulnerable dependants or to save tax.
If you and your spouse have severed your joint tenancy and created a tenancy in common in relation to your property (see further below) you can then make new wills creating a Life Interest Trust and leaving your half share of the property direct to your children (or grandchildren) but giving your spouse a right to occupy and continue to live in the property until your spouse’s death at which point your half share then passes to the children (or grandchildren).
The great thing about setting up a property Life Interest Trust in a will in the above way is that you can pretty much guarantee that at least half the property is protected and ring fenced. This half share can protected for various reasons which could include, making provision for your children or grandchildren, or protecting a vulnerable person.
Most properties are held by couples on what is called a “joint tenancy”. A joint tenancy is where a couple own a property equally but if one of them dies then the property automatically passes to the survivor. That is fine for most circumstances but if a couple want to make sure that a proportion of their property is left to their children or to consider some tax planning then they need to consider severing the joint tenancy and creating a property Life Interest Trust.
Tenancy In Common
The joint tenancy has to be severed so that a “tenancy in common” is created. This then means that on the first death instead of the property automatically transferring to the survivor (as it would on a joint tenancy), the property instead falls into the deceased’s estate and is disposed of in accordance with the terms of the deceased’s will.
In essence Life Interest Trusts are very useful ways of protecting half of your property. You make sure you and your spouse own your property as tenants in common. You and your spouse then should make wills with a Life Interest Trust including leaving your each half share not to each other but to your children.
Whoever dies first their half share is held on trust for the survivor to have the right to continue to live in the property rent free and then on the survivors death the first deceased’s half share passes to the children. This way whatever happens after the first death (even if the survivor gets remarried or goes into residential care) then you can be sure that the first deceased spouses half share of the property is protected and definitely eventually passes to the children.
My name is Adrian Chambers. I am a lawyer who specialises in creating and preparing Wills.
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