What is a life interest trust and should I include one in my Will?

Written by Dannielle Wright

Edited by Gabriella Ferraro

A successful estate plan is the combination of a number of tools and strategies, which aim to achieve your goals for distribution of your assets after death, while addressing any prevalent issues, such as protection of the assets, family breakdowns and taxation consequences.

A life interest, in the context of estate planning, is a form of Testamentary Trust where the Testator (will-maker) grants an individual (in most cases the surviving spouse), a lifetime benefit from an asset or the income from an asset of the estate of the Testator.

The individual, known as the life tenant, can reap the benefits and use the assets as if they were their own for their lifetime. Once the individual has passed, the asset is then distributed amongst the beneficiaries in accordance with the original owner’s Will.

Incorporating a life trust into your Will is particularly appealing for individuals who have remarried and have children from previous relationships. This is because a life trust will:

1. Allow the surviving spouse to continue benefiting from the property/assets during their life or until they remarry;

2. Restrict the life tenant from gifting the estate during their lifetime or in their Will; and therefore

3. Allow the property/assets to be distributed amongst the intended beneficiaries once the life tenant has passed or remarried.

By granting a life trust, you have the comfort of knowing your surviving spouse will be provided for during their lifetime, whilst being assured that your assets will ultimately be passed to your intended beneficiaries.

The information provided in this article is general advice only. Given that each situation is unique, we recommend that you contact our estates team if you are considering a life interest trust for your Will. Our team can be contacted on (03) 9311 8911.