Q&As

In what circumstances in a life interest trust is it possible to appoint capital to the life tenant? This is asked in the context of a trust where the life tenant and the remaindermen are all in agreement to capital being appointed to the life tenant and wish the trust to continue.

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Produced in partnership with Lynne Counsell of 9 Stone Buildings
Published on LexisPSL on 25/06/2020

The following Private Client Q&A produced in partnership with Lynne Counsell of 9 Stone Buildings provides comprehensive and up to date legal information covering:

  • In what circumstances in a life interest trust is it possible to appoint capital to the life tenant? This is asked in the context of a trust where the life tenant and the remaindermen are all in agreement to capital being appointed to the life tenant and wish the trust to continue.
  • Life interest trusts
  • Appointment of capital to life tenant
  • Summary

In what circumstances in a life interest trust is it possible to appoint capital to the life tenant? This is asked in the context of a trust where the life tenant and the remaindermen are all in agreement to capital being appointed to the life tenant and wish the trust to continue.

We have assumed that: This response does not consider the tax implications of an appointment of trust capital to a life tenant.

Life interest trusts

A life interest trust is a trust whereby the life tenant has either the right to use an asset, such as a residence, or the right to income from the asset. A life interest trust can be terminable, particularly in relation to the occupation of property, on a specific event such as remarriage or cohabitation, as well as death.

A life interest trust is also known as an interest in possession trust. Such trusts have various advantages:

  1. the preservation of assets for family members

  2. the property in question will not form part of the settlor’s assets in any financial assessment for care provision

  3. if the life tenant becomes bankrupt, only the income of the trust property can be recovered by the trustee in bankruptcy. The capital will be preserved

  4. mitigation of taxation—generally, when the beneficiary dies, there is no inheritance tax payable on the asset in the life interest trust as

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