What are the key features of a Life Interest Trust?
A life interest trust has several distinctive features that make it a valuable tool for estate planning and asset management.
- Defined Roles – The trust involves distinct roles: the settlor who creates the trust, the life tenant who benefits from the trust assets during their lifetime, and the remainder beneficiaries who receive the assets after the life tenant’s death.
- Asset protection – Assets within the trust are protected from the life tenant’s personal financial risks, such as creditors or divorce settlements, so the assets remain intact for future beneficiaries.
- Control over asset distribution – The settlor specifies how assets are handled and distributed, providing a clear roadmap for managing the trust assets that aligns with their wishes.
- Flexibility and security for the Life Tenant – The life tenant enjoys the use of the assets (like living in a house) without owning them, offering both stability during their lifetime and protection for the assets from misuse or mismanagement.
- Tax benefits – While the trust must be carefully structured, it can potentially reduce inheritance tax liabilities, making it an effective tool for tax planning.
