If the survivor becomes ill, to a degree that they require long term residential care, an assessment will be made of their financial situation. This would include anything that they had inherited when the first spouse died.

Depending on the amounts involved, and the time spent in residential care, almost all of the estate could end up being used to fund care.

The survivor is free to alter their Will after the first spouse has died. This could result in the preferred beneficiaries of the first spouse losing out on an inheritance.

With a Life Interest Trust Will each partner can protect their share of the assets for their preferred beneficiaries (often their children), whilst still allowing the survivor to enjoy the benefit of the assets for their lifetime. A Life Interest Trust Will can help ensure that some of your assets are protected from care fees and are passed to a beneficiary of your choice.

Julie and John have Wills leaving everything to each other outright.

John carries on living in their property, so it is not included in Julie’s financial assessment.

John dies. All of the house and money now passes to Julie. Julie is therefore required to pay all of her own care fees.

After 5 years her assets have dropped below £14,250* and her fees will be met by the Local Authority.

When she dies, her children get the amount left, which is less than £14,250.

Julie and John have made Wills leaving each other a Life Interest Trust in their half of the property.

John carries on living in their property, so it is not included in Julie’s financial assessment.

When John dies, Julie retains her half share of the house and all of the savings. The house is sold and John’s half of the money is invested.

Julie’s care fees are paid from her half of the house and the savings. She receives the income from John’s share of the house. When Julie’s savings fall below £14,250 her care is funded by the Local Authority.

John’s £125,000 is held in trust, and so cannot be used to cover Julie’s fees.

After Julie’s death, John’s £125,000 goes to their children as well as Julie’s remaining £14,250.

It could well do, depending on your personal circumstances. However, tax is a complex issue and we advise you to take proper legal advice about the consequences of your Will to make sure that it is drafted in the most tax efficient way.

What else do we need to do to make sure that our Life Interest Wills work?

Appoint Trustees: Trustees will be the people who are responsible for the Trust when the first spouse dies. Your Trustees can also be your Executors. It is also possible for beneficiaries to act as Trustees. It is important that the Trustees are trustworthy and that they can get on with each other and the surviving spouse.

Make sure your property is held in the right way so that it can pass into your Trust when you die: Most couples own their home as ‘Joint Tenants’, meaning that when the first spouse dies, their share of the home will pass immediately to the survivor. It is very important that the ownership is changed to ‘Tenants in Common’.

This means each spouse owns their share, and each owners share will pass according to their Will. This can be achieved by both owners signing a simple document called a ‘Notice of Severance’. This is then registered with the Land Registry or placed with the Title Deeds to your property.

What might we need to do when the first spouse dies?

When the first spouse dies, it is usually recommended that the names of the Trustees at that point are registered on the Legal Title to the Property to ensure that trust assets are protected.

In order to do this a Grant of Probate is often required and this can incur legal costs with the Land Registry.

Often the potential savings far outweigh any legal costs, but if you are worried about this you should speak to your legal adviser. We suggest that on the death of the first spouse, the Trustees take advice to ensure that the assets are suitably protected and to avoid undue costs or delays at a later date.