Flexible Life Interest Wills – Plan & Protect Your Estate

The majority of couples, whether married, cohabiting or in a civil partnership, have simple Wills, under which on the death of one partner the entire estate first passes to the other, and on the second death then passes to others such as children. However, life can be more complicated, for example, if someone remarries after a partner’s death and there is a risk that hard-earned assets might not pass to intended beneficiaries, such as children. One way to protect assets is through using a Flexible Life Interest Will.

What is a Flexible Life Interest Will?

Under this type of Will, when one of a couple dies, their assets pass into a Trust rather than passing to their partner.

There are trustees who manage the assets held in the Trust, and pay an income to the surviving partner for the rest of their life – this is known as ‘a life interest’ and would for example give them the right to continue living in the property and to receive the income generated from savings and investments.

A life interest usually lasts until the surviving partner dies. However, a flexible life interest means the trustees have the power to rearrange assets during the survivor’s lifetime. To set up a Flexible Life Interest Will, a solicitor will set out how you want the trustees to exercise their powers by preparing a letter of your wishes.

For example, this would usually state that you wish your spouse/partner to live comfortably for the rest of their life and then for any assets to pass to your intended beneficiaries, such as your children.

What happens if my spouse/partner remarries or cohabits?

A benefit of this type of Will is that whatever situations occur to your partner/spouse after your death, your assets remain safe for your intended beneficiaries. Your spouse/partner is only entitled to the income from the Trust and if they remarry, their new partner cannot claim from the Trust fund.

Moreover, if the trustees think it appropriate, they can remove the right to income for your spouse/partner.

What happens when my spouse/partner dies?

Your assets can either remain in the Trust or can pass to your beneficiaries. The trustees will follow your letter of wishes and would usually liaise with the beneficiaries as to their wishes, as there may be good reasons to keep the Trust going.

Inheritance tax

Another benefit of a Flexible Life Interest Will is that it can also help to save inheritance tax. When the first partner dies, there is no tax to pay and their tax allowance will pass to the survivor.

If the capital is then rearranged and the survivor lives for seven years after this, this will essentially be free of Inheritance Tax and the survivor will still have a double allowance available.

Protection of assets from care fees

A Flexible Life Interest Will can also protect your assets if your surviving partner needed residential care, as the assets in the Trust would not be taken into account when assessing their ability to pay care fees, thereby ensuring that your intended beneficiaries receive their inheritance intact.

Every situation is different, and it is always worth speaking to one of our advisers to see if this type of Will would be suitable for your circumstances.