Flexible Life Interest Trusts

A Flexible Life Interest Trust (FLIT) in your Will gives you more peace of mind if you have significant assets and you wish to protect their value for your family.

A FLIT if often described as the ideal modern Will Trust. This is because it not only allows for adequate provision for your surviving spouse or partner, but it also incorporates flexibility into your Will so that other family members may also benefit.

The FLIT is flexible because it allows your Trustees to advance capital as well as income to your beneficiaries.

This Trust is created on the death of the first spouse or partner at such time the capital assets of the deceased are held in a trust which pays any income generated to the surviving spouse/partner for their lifetime.  This is treated for Inheritance Tax purposes as an outright gift to the survivor.  So, for married couples or those in a Civil Partnership, it does not create a tax charge and does not use any of the Inheritance Tax allowance of the deceased spouse – preserving it for later use on the death of the surviving spouse.  On the death of the survivor, the trust capital is passed to nominated beneficiaries, such as children.  Because the capital in the trust is not owned by the surviving spouse/partner, it cannot be given away by them to, say, a new spouse or partner, and it cannot be assessed if the survivor needs to end their days in a care home.

Key benefits:

• Guarantees who will benefit from your cash assets and investments as well as property if your surviving spouse/partner either remarries, enters into a new relationship or writes a new Will after your death;
• Allows a nominated person to benefit from the income generated from your investments when you are gone, whilst protecting the capital value for future generations; and
• Reduce the potential impact of residential care fees on the value of your estate should your surviving partner go into care.

The Trust:

• Includes powers for your trustees to lend trust capital to the survivor.  So if they need capital, the trustees can lend it to them – with the capital being repaid either when the survivor dies or if they go into care.
• Includes powers for your trustees to give capital to the survivor.  It is unlikely that this power would be used because the capital would then be owned by the survivor and could be given by them to a new spouse or partner and would be assessed if they went into care.  However, as a flexible trust it covers eventualities both foreseeable and unforeseeable. This power, for example, enables the trust to be wound up and the whole estate given outright to the surviving spouse/partner.
• Includes powers to pay capital to your nominated beneficiaries (children, for example) so that if children need capital and the surviving spouse/partner does not (for example, if the survivor is in a care home and the children are in need of capital to reduce their mortgages), capital in the trust could be paid to them.
• Includes powers for the trustees to convert some or all of the trust into another type of trust.  So if, for example, Inheritance Tax laws change and make it preferable for the trust capital to sit in, say, a Nil Rate Band Discretionary Trust, your trustees could do this.

At Geoffrey Lurie we can offer expert advice and help you plan as best you can for the future. We can tailor our advice to meet the needs of your individual circumstances. Please contact us on 0191 466 1444 and speak to our expert lawyers who will be able to assist you,  email us on advice@geoffreylurie.com or get in touch here