What is a life interest in a Will?

A couple each had a child from an earlier relationship.  When they came to do their Wills, they were each worried about leaving all of their property to each other, in case the other of them left the other’s child out of their Will when they passed away.

Their legal advisor suggested to them that they could consider a life interest to protect against this scenario.

A life interest is a right recorded in someone’s will for the use of, and/or benefit from, an asset during the survivor’s lifetime (usually a spouse).

This means the person who benefits from the interest does not does not have legal ownership of the asset; but a right to use of it – such as the right to live in a property or receive income from investments.

A life interest will usually be for the remainder of the survivor’s lifetime, but if preferred it can instead be until they re-marry or enter into a de-facto relationship.

Once the life interest has expired (either by the death of the person with the life interest or their entry into a subsequent marriage or de-facto relationship), the asset will be passed to those named in the will as the final beneficiaries.

A life interest is most commonly used in the situation of blended families where an asset is protected for a child from an earlier relationship. The deceased’s share of the asset will fully pass to the child only after the life interest has expired.

This means that a spouse would still have somewhere to live (or funds to live off, depending on how it is set up), but would not be free to deal with the deceased’s half of the property as they wish.

If the spouse instead received full legal ownership of the assets or property, they could spend all the money, sell the property, or bring a new partner onto the title and then whittle away the share of the deceased’s property that the child would have received.

A life interest clause thus provides a sense of security that something will remain for the child / the final beneficiary.

A life interest can extend to future properties that the survivor buys, rather than just the one they were residing in on the spouse’s death.

In order to provide for a life interest in real estate, the existing property needs to be held as tenants in common (ie: in shares) rather than owned jointly.

If you are considering a life interest, your legal advisor will also talk you through whether you want the life interest to only be in real estate, or whether you want it to extend to other assets, and what terms you want to put around the life interest.

Another option in a scenario where the Will-maker simply wants to give a person the right to occupy the property for a certain period of time, for example to allow them some time to find a new home, is to instead include a right to occupy in the Will.

Your legal advisor will be able to advise you about what is best for your needs.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.