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Life Interest Trusts

Often a Settlor may wish to provide for a relative, such as his wife during his wife’s lifetime, and provide for another, his child for instance, on the wife’s death.  A common method is to settle a Life Interest or Interest in Possession Settlement.  The income of the Trust (bank interest, dividends, other investment income) is paid periodically to the widow, known as the ‘life tenant’ during her lifetime.  On the widow’s death, the capital of the Trust is payable to the surviving child.

This method is commonly used in the case of real property, where the settlor will state that the widow is to be allowed the use of the family home during her lifetime, and on her death, the children become absolutely entitled.  The widow has somewhere to live for the remainder of her days and the surviving children become absolutely entitled on her death.

It is possible to create successive life interests so to use the example above, the family home can be enjoyed for the widow for life, for their child following the widow’s death, and following the death of their child, for his or her surviving children.

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