Glossary · UK
What is Life Interest Trust?
A trust giving one person the right to income or use of assets for life, with the capital passing to others afterwards.
Full Definition
A life interest trust gives a named beneficiary, the life tenant, the right to benefit from trust assets during their lifetime - typically to receive the income or to live in a property - without owning the capital. When the life interest ends, usually on the life tenant's death, the underlying capital passes to the remaindermen, the people entitled to inherit. It is a form of interest in possession trust and is widely used in wills, for example to let a surviving spouse remain in the family home while ultimately preserving that asset for children from an earlier relationship. Trustees hold legal title and manage the assets in the interests of both the life tenant and the remaindermen. The tax position varies with how the trust was created; some qualifying interests are treated as part of the life tenant's estate for inheritance tax, where the nil-rate band is GBP 325,000 plus up to GBP 175,000 residence nil-rate band. Specialist advice is recommended.