What is a Life Interest?
A Life Interest provides that property and other personal assets like shares or money in bank account are held on Trust for the benefit of a person for their lifetime. If a Life Interest is granted in a house, the benefit is usually something like being able to live in the house. If a Life Interest is granted in shares or a bank account the benefit is the interest or dividends of the asset.
A Life Interest can be granted to someone in a will. When making your Will you can insert a Life Interest Clause that outlines who is to benefit, and any conditions associated with this benefit.
A person who holds a Life Interest is known as a Life Tenant.
A Life Tenant can treat real property (that is, a house) assigned to them as if it was their own for the duration of their life.
It is common to establish obligations for a Life Tenant to abide by, such as a duty to maintain the property and to keep it insured.
When creating a Life Interest Agreement you want to ensure that you are giving someone a benefit, not a burden. If you are considering placing a Life Interest Clause in your Will it is worth thinking about the ongoing costs of property maintenance and upkeep and making allowances for these costs in some way.
When are Life Interests Used?
A common situation in which a Life Interest is used is when a person has remarried and owns a property with their spouse as tenants in common, but has children from a previous relationship. They wish to provide a home for their current spouse, but then pass their share of the property on to their children after their spouses' death.
To ensure that their spouse has somewhere to live for the duration of their life, the Will maker places a Life Interest Clause in their Will which makes their spouse a Life Tenant.
The surviving spouse has the right to enjoy the home for their lifetime.
When the surviving spouse passes away the home is sold and distributed according to Estate of each spouse. If the property is held in joint names then neither party can leave a life interest in their share of the property, as it passes automatically to the survivor on the death of the first of them.
Other scenarios where a Life Interest may be used is where a parent owns a property and wishes to provide a secure home for one of their children for the remainder of their child's life. Life Interests can be granted to children, as well as to any other person a Will maker sees fit. When a person is a Life Tenant their rights to property are protected.
An example of a Life Interest in Property
Here is an example of a Life Interest in action:
Pat and Bob own a property as tenants in common. They have both been married and had children before, but they have no children together. Pat wants to leave her half of the house to her son, and Bob wants to leave his half of the house to his daughter, but they are worried that when the first of them dies that the deceased’s child will sell the house to get their share, and the surviving spouse will have nowhere to live.
In this instance Pat and Bob can leave their respective shares of the property to their children. However, they can also give each other a Life Interest in their property. This means that when one of them dies, the survivor will have the right to live in that property for a certain time and under certain circumstances. Assuming that they want each other to live in the property for the rest of their natural life then they grant a Life Interest in the property. This means that the deceased person’s child cannot sell the house until the survivor dies or moves on.
What happens if a surviving spouse needs to go into care?
One of the main reasons for creating a Life Interest is to ensure that you provide for your partner. But what happens if after your death your partner needs to go into care and can no longer live in the home where the Life Interest is provided? Can your property be sold and used to pay for nursing home accommodation, for example?
It is possible to tailor a Life Interest Clause to suit your needs and the potential future needs of your partner.
You can include conditions to ensure that a property can be sold to care for your surviving partner, with the remaining amount from the sale of property distributed as part of your Estate.
A Life Interest can be customised as much as you like to ensure that you and your spouses' needs and wishes are met.
A Life Interest is a way to ensure that your surviving partner is cared for throughout their life while still ensuring that your share of property and/or assets passes to your children.
Create your Will with a Life Interest Clause today
We understand that implementing a Life Interest clause may be something you are interested in doing. Make sure your Will is accurate and correct by contacting Rose Lawyers today. We are experienced in working with Life Interests and can assist you in placing a Life Interest Clause in your Will.