Age Legal Services | Interest in Possession Trusts | Age Legal Services
Considering setting up an interest in possession trust? Contact Age Legal Services to see if a life interest trust is the right option for you and your family.
interest in possession trusts, life interest trusts
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A short guide to interest in possession trusts

If you want to make sure that your beneficiaries are entitled to all the income from their trust as soon as it is produced (minus the usual expenses, of course), it could make sense to use an interest in possession wrapper for your spouse or other dependents. This type of arrangement is otherwise known as a life interest trust.

 

If a couple’s home is placed into an interest in possession trust, the trustee will be able to continue living in it and enjoy income from rental yields or sales profits from it while they are alive. However, when their time comes, their surviving partner (the ‘life tenant’) will still have the right to use the property and benefit from it until their own death.

 

An Immediate Post Death Interest (IPD) will be created as soon as the first partner passes away, and this grants the life tenant the interest in possession.

 

Alternatively, the testator can create a Right to Occupy Trust, which simply gives them the right to carry on living in the property but doesn’t entitle them to extended income from the asset.

 

Who will benefit the most from an interest in possession trust?

 

Interest in possession trusts are particularly popular amongst couples who have remarried and now jointly own a property. Naturally, they will want to protect the capital assets of the children from their first marriage. This kind of trust can be used to ensure their individual shares in the property are passed down to their respective children.

 

What are the tax implications of this type of trust?

 

In the case of a full IPD, capital from the property will be added to the value of the deceased person’s estate for the purposes of inheritance tax. However, a transferable ‘nil rate sum’ exemption allowance can be used to offset the tax liability on the life tenant’s estate.

 

If either party has been widowed from a first marriage, they may be able to use their first spouse’s nil rate sum, if it’s still available.

 

If the life tenant decides to terminate the trust while they’re still alive, the transfer is considered to be potentially exempt. As long as the surviving partner lives for at least 7 years after terminating the agreement, the capital generated from the property should still fall outside of their estate from an inheritance tax perspective.

 

Is this kind of trust the best option for me and my family?

 

The best way to find out if an interest in possession trust will be suitable for your situation is to contact Age Legal Services for a free, no-obligation discussion. At your convenience we can arrange a free home visit to those who live within a 25-mile radius of Colchester, and for an affordable fixed fee outside of this area.

 

Who are we?

 

Age Legal Services has been vetted and approved by the New Leaf Will Writers Foundation and Essex Trading Standards to visit clients in their own homes. We have also undergone adult and child safeguarding training and work closely with partners/charities to recognise the challenges and dangers faced by older and vulnerable persons in their homes. We have been providing a professional personal service in the Essex and Suffolk area for over 8 years and our excellent client testimonials on yell.com are a testament of the diligence, professionalism and care that’s shown to each and every client.

To speak to a member of our team, please call 01206 820638

Alternatively, please complete our online enquiry form.