Issues around life interest in a property

[Bouffe]

I've just seen another thread which mentions leaving a life interest in a property to a partner, while leaving the property itself to children and it has revived some concerns over my own situation.

My partner and I met 21 years ago when we were in our early 40s. We're not married. Neither of us have children but both of us have nieces and nephews whom we'd like to help out in our wills. We live in my partner's lovely house which he owned outright when we met. I pay half of all bills, including maintenance and improvements, with the money going into a joint account. For the first twelve years of the relationship I rented out my old home on the basis that if we split up I would need somewhere to move to. A few years ago I sold it, invested the proceeds and haven't had to touch them. I offered, when I sold my previous home, to buy a share in my DP's property: I could have afforded 50%. My DP declined.

We both work and have our own pensions and investments and will shortly retire. We're both drawing up wills at the moment and he proposes leaving me a life interest in the house should he die first, with the property going to his niece and nephew on my demise. It's a four-bedroom house in a half-acre garden and over the last decade I'd guess we've spent around £10k pa at least on maintaining the house and garden. That will go up as we get older and can't do so much work ourselves.

I can't imagine being here, on my own, in my 80s. I've asked my DP about whether I'll have to bear all the maintenance costs and he's pointed out that I'll be living here rent and mortgage free, so £10K pa for maintenance will be cheaper than renting.

Can anyone explain the rights of a person left a life interest in a property? I think if it means being trapped here spending money on the maintenance of the property for his niece and nephew's benefit, then I would need to sort out some form of alternative provision for myself.

In the light of the above, does anyone have any observations on someone in my position paying half the costs of, say, building a new double garage and workshop with a studio room above it? This is a project my DP has proposed and it's likely to cost somewhere in the region of £50k. I was expecting to contribute half until a friend casually pointed out that it will add to the property's value but I won't ever be in a situation to get my money back. I'd been thinking about the benefits of a larger garage we could get both cars in, plus space for an occasional guest in the studio. But my friend does have a point...

I don't think it's fair to pay £10,000 a year to maintain a property you have no interest in. There is no way I'd be paying more than wear and tear type upkeep, nothing major like a new kitchen or a garage conversion. I'm with your friend.

Sorry, I can see your share is £5,000 a year. My comments stand though.

Do you each qualify for the spouses pension? If not have you considered marrying before retirement just for that alone? You could still leave the money / house as you wished.

There are different types of life interest. It could include provision around selling and buying something somewhere else/smaller for instance so you could downsize. You may have both moved elsewhere anyway by then.

It does sound like he sees it as 'his' house so he should be making capital investments eg extensions but you would contribute towards 'rent' which he might put towards day to day renovations.

You can vary the Will on death or you can (usually) terminate a life interest but you need a solicitor to draw up a deed.

You might downsize in future though, before DP dies? A 4 bedroom house with big garden is a lot for someone in their 70s/80s!

Thank you all for seeing my point and not accusing me of being mean and money-grabbing.

We've discussed marriage and I've proposed it purely for IHT reasons. He knows that it would make financial sense but he had a horrible divorce a couple of years before we met and doesn't want to go through that again. I've pointed out that if we don't his niece and nephew will be hit. I think he has a rather romantic idea of the house being passed down through the family, but I don't imagine they will want to relocate to this area.

I've always been financially independent — hence keeping my own home for so long after we got together — and a bit marriage-averse, although I can see the benefits for many women. While it's logical to assume that we'll downsize at some point, I know how attached my DP is to this house. He inherited it in poor condition from his aunt and uncle and has transformed it. He talks about having to be carried out of it. It's lovely living here now.

We've both led quite complicated working lives, with various moves and retraining and so on, but we both have teaching pensions and I had a spell in the public sector in the noughties so we've nominated each other for those. He has a couple of company pensions from the 90s which I'm named on. I've done a lot of contracting and freelance work and run my own small business, so have a SIPP and ISAs and various other investments.

Thank you for the information about being able to vary wills etc. I'll need to sit down with my solicitor and find out more. I was hoping that when I retired I could gift some of my savings/ lump sum to my niece and nephew, who are thinking of buying their first properties. But perhaps I need to think more carefully about that, too. It's all a little unsettling.

Life interests generally work best when everyone involved understands how things are going to work, so please do speak to your solicitor. Generally you can downsize provided the trustees agree (which they should) and this just releases cash back into the trust. Maintenance should ideally be met from the trust; you meet day to day costs like utilities.

How hung up on the details is it appropriate to be at this stage of things?

As others have pointed out, this may never happen: the place may be sold in ten or 15 years' time if we decide life would be easier and the overheads cheaper in a lovely apartment overlooking the sea (say). So it seems unnecessarily nit-picking to try and dot the 'i's and cross all the ts.

On the other hand, bad things happen to people all the time and we're entering what I've seen called the Sniper's Alley stage of life. Yikes.

I find it a little odd that he won’t leave the house to you outright instead of this potentially complicated arrangement. It would make more sense to leave money or investments to the niece & nephew, especially if they are not going to be interested in living in it (and presumably even if that was the case, they wouldn’t want to share so one would have to buy out the other?)

And saying that you get to live in for free is a red herring. If you had stayed in your own house you would have paid off your mortgage by now so you would not have that expense anyway.

Yes, I'd concluded that, too. I don't know what any of this means but the more I think about it I suppose the more uneasy I get. I wish he'd talked about if before he went to the solicitor and they came up with this.

But then ops family would inherit substantially more than his family as his house would then pass to her then on to her family.

Hopefully ops investments kept pace with house prices so she isn't disadvantaged by not keeping her house on.

Just to say I'm a reasonable person and if we were to marry and if I were to end up inheriting everything I would of course try to find a way of achieving his wishes as soon as possible rather than keeping them waiting for their inheritance. I don't think I'd want to stay here on my own: it is a beautiful house but very much his, and I really don't want to spend my retirement gardening. I know his nieces and nephews and I wouldn't want to rip them off.

Then if they inherit the house and you use your savings to buy another place it wouldn't be too different from what you are thinking about anyway.
Maybe just start building up your own savings more? Definitely no sinking them into this house!

Yes, in the nicest possible way I'm going to make it clear to him that as he could be run over by a bus at any time, I'm not going to invest in capital projects to improve the value of the house for his family to inherit.

I suspect this is going to be really uncomfortable but the conversation needs to be had.

@PosterBoy If I was the niece/nephew it would never occur to me to expect to inherit an uncle’s house when he had a partner he’d been with for so long. I would have no expectations whatsoever.

If I were the person who had bought my house, I wouldn't expect it to eventually end up going to my partner's nephews and nieces - I can see why op's partner wouldn't want that either. It's about how to provide for your partner without then seeing all the money go outside the family. Life trusts are really good for that. They can be quite detailed, which is perhaps what is needed here. Perhaps funds can be left to cover the inheritance tax bill and upkeep.

Why should one side inherit from both people and the other side inherit from neither? Just based on who dies first?

MIL was in a similar situation, except she owned half of the house.

When her husband died, his half was left to his (adult) children, with a life interest for MIL. His savings etc were also left in trust to his children, I think MIL was entitled to the income from the trust (but not the capital).

Every maintenance cost, including boiler services and things like new carpets, was shared 50:50, in accordance with the ownership of the house. MIL would pay upfront, and then claim back 50% from the children (via the trust).

So I would think that if you didn't own the house, but the niece and nephew did, then they should be paying all the maintenance costs. Whether they would, of course, is another matter! and I would say you definitely need to get a solicitor to carefully word the will, laying out exactly who would be responsible for what.

And no way would I be contributing anything towards capital improvements now! Not unless the legal ownership of the house was rejigged to reflect it e.g house value now £200k, you put in £50k towards improvements, and the ownership becomes 80% your partners and 20% yours.

In that situation @RockaLock , what happened as she grew older? Did she stay in the house or sell it and downsize? I can think of a number of elderly people I know whose final years are spent sleeping in the dining room and have strip washes in the kitchen because they can't get upstairs but don't want to sell the house because it's the children's inheritance.

Thinking of trusts, I've had recent experience of having to use a solicitor and the bills add up. I'm someone whose basic rule in life is keeping overheads low, so the thought of having to deal with a solicitor every time I needed to get the boiler serviced or the gutters cleared alarms me. An outlying branch of my family has a family trust and whenever the subject comes up they complain long and loud about how it being whittled away by admin/ fees.

Absolutely get hung up on ALL the details. It is possible (but unusual) for a life interest trust to give the right to live in a specific property and only that property for life, but also possible for a sale and repurchase something more suitable to be possible.

Hi @Bouffe , unfortunately MIL didn't live long enough to get to that stage

Re: trusts, every time she claimed money from the trust, she did it via the solicitor managing the trust. I think she literally just sent in a copy of the invoice and asked them to send her a cheque for half of it.

So the trust probably did incur fees each time, but they would have been paid out of the trust and so it didn't cost MIL anything when she made a claim.

Yes, in the nicest possible way I'm going to make it clear to him that as he could be run over by a bus at any time, I'm not going to invest in capital projects to improve the value of the house for his family to inherit which in turn could leave me short of capital to maintain the house and property too.

Might as well mention that factor as well

@PosterBoy I guess I’m coming from the pov that it might be more usual in a long term relationship for the surviving partner to inherit the majority of an estate & only when they die would the estate be divided between all the nephews and nieces. But I appreciate that in some families with lots of inherited wealth, there may be more concern to ringfenced assets etc which are viewed as belonging to only one side of the family.

@Bouffe I would definitely not contribute to any improvements to the property going forward.

All these details should be laid out in a legal document. I am married but my H and I are keeping our finances separate as we both have previous children. I have left him a life interest in this property which is mine . There are stipulations if that situation occurs eg he pays maintenance which is essential to living there eg service of boiler but anything major ( over a certain amount but I can't remember ) the estate pays. He cannot sell it and use the money for a different property. He cannot move another person into the house. It can't be used for care home fees. My children will inherit the property 100%.

You should have had a cohabitation agreement from your start of living together. You have gained in that you had the income from the rental of your property. Sometimes people in this situation pay rent to the house owner.

I don't think you should be paying half of an extension now. It is your option to refuse the life interest and make your own living arrangements.

This. Ideally your DP would leave a pot of savings to cover capital costs, but otherwise the costs have to be met by the eventual beneficiaries. In the event they can't/won't pay, you can choose to try and negotiate a share of the property in return for you covering the cost of the works. If they don't pay up, I suspect you would be able to force a %age of the house in return for paying yourself, but that would come with a hefty legal bill and might not make it worth it. In theory, they should want to keep it in good repair as it is their investment, but their opinion about 'needing' a new bathroom may differ from yours.
A good relationship between the parties makes the whole thing a lot easier though (ask me how I know... 😏), as you can discuss things that are on the horizon and will know their financial situation to some extent. You would be responsible for anything 'wear and tear' or cosmetic such as painting, they are responsible for anything structural or things that would add clear value such as a kitchen & bathrooms.

The latter is what dh and I have done. We own our house and when we made our wills we changed from joint tenants to tenants in common, so we could both set up a life interest trust. We stipulated that the survivor would be able to sell and move to another property, and the kids would still own their half.

@Bouffe Your DP has put you in a vulnerable position here and uncomfortable though it may be, you'll have to explain this to him. You can't rely on his nieces and nephews being nice and not kicking you out of the house. We see really nasty inheritance stories quite often.

You can't rely on his nieces and nephews being nice and not kicking you out of the house

If she has a life interest, they cannot kick her out.