By way of example, if you have children from a previous marriage or relationship and wish to protect their inheritance, then you can create a Life Interest Trust. Often your share of the house is put into the trust and the rest of your estate passes directly to your partner but you are free to include a greater proportion of your estate. Such a trust:
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ensures that the capital from your estate does not pass to your partner but is retained within the trust for your children and passes to them outright on the death of your partner
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provides an income for your partner (if there is one).
The advantages of a Life Interest Trust are that:
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the assets are protected for your children on your partner's death
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they are also protected if your partner goes bankrupt or requires nursing care etc.
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there are no ongoing charges such as the ten-year or exit charges as would apply to a Discretionary Trust
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the spouse exemption still applies so property passing into a Life Interest Trust to a spouse or civil partner still benefits from no charge to IHT (subject to domicile).
The disadvantages are:
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control and ownership of the property passes to your trustees
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the capital value of the assets aggregates with your new partner's estate on their death for IHT purposes.
Life Interest Trusts are popular even if it is not a second marriage. It is very much a personal choice of what you want to achieve and what you are comfortable with.
Call me to find out more about setting up a Life Interest Trust in your will.