Liferent Trust Wills

[MarzipanMice]

has anyone experience of drawing up Liferent trust wills? We live in Scotland. Both DH and I have children from previous relationships, no children together but have been married for 15yrs. We would like all assets to be divided equally between our children upon our deaths. We also want to protect each of our children’s future inheritance, if for example DH passes away and I remarry or choose to change my will (or visa versa). From what I’ve read about Scottish law, Liferent wills are a good option in blended families.

Not in Scotland, but this is the same thing as doing an interest in possession trust in England & Wales. If you search the threads there are plenty of them about people doing it in England & Wales.

The main difference is just that they are called different things in Scotland.

There are two things that you will need to do. Most people own their homes as "joint tenants" so they both equally own the whole house (like with a joint bank account). So, when one of you passes away the house automatically goes to the surviving spouse regardless of what any will says.

In Scotland I believe this is referred to as a "Survivorship Destination" and the deeds will say something like the property is owned "equally between them and to the survivor of them".

The other way to own a home is as "tenants in common". In this situation you each own a separate 50% of the home and you can leave your own 50% to whoever you like. In this situation it is usual for each spouse to leave their 50% to their children (but you can leave it to whoever you like).

In Scotland, confusingly, what are called "tenants in common" in England are often called "joint tenants" or it is said that the property is owned "pro indiviso".

In that situation the property deeds will say that the property is owned "equally between them and to their respective executors and assignees".

So you will have to change how your property is owned from a "survivorship destination" to "pro indiviso". I would strongly suggest that you get a solicitor experienced in this area of the law to do that.

Once you have done that you can them make a will along the lines that you want.

Thank you for the information @Another2Cats. We do have survivorship destinations on the deeds, it’s 50/50 for each of us so we will look to have this changed to tenants in common. We have 3 children (dh has 1 and I have 2), but we want all 3 to inherit an equal share. We do need some legal
advice on how we ensure this happens as tenants in common.

I know that with a Liferent trust, if I die then my 50% share would go into trust and DH would continue to live in the house until he died,
where his 50% share would then go into the trust and automatically be divided equally 3 ways. But, what happens if I die and my 50% goes into trust, but DH has moved on with life and remarried. Would his 50% share still be divided equally 3 ways or could he choose to leave his 50% to his new wife or sole child? Or would our entire 100% asset be protected by the Liferent trust? It’s not nice to think of your own mortality, but we do want to protect all 3 children equally. Feels like a minefield but we are not in an unusual situation as a blended family, I’m sure it’s been done thousands of times before by solicitors!

I tried to find out about this and the main thing I found is the law is totally different in England and Scotland. As is the terminology, which is confusing.

Another very valid point my husband just raised is - if one of us dies, the deceased 50% transfers to the trust. The surviving spouse still owns their 50% outright…but what happens if they want to downsize and then want to spend £100k on living their best life…can they do that or would the money be locked away as the trust owns 50%?!

I've had a Deed of Trust for my house for 5 years now (Scotland). If I die my partner has a life rent to live there for the rest of his life. After that my children will sell it and split the proceeds according to my will.
I got it drawn up by a solicitor and, unlike some I've heard of in England, it doesn't cost anything to maintain.

do you have a clause in it for the surviving partner to downsize or move?

No because it's only a small house so no need to downsize or move

Removed due to double post

"...where his 50% share would then go into the trust and automatically be divided equally 3 ways."

This is not correct. If your DH survives you then, when he dies, his share of the home does not go into trust but passes directly to whoever is named in his will.

The reason for this is that a will typically has a condition that any beneficiary survives the will maker by eg 30 days. In that situation, you will have died before he did so you won't be a beneficiary.

"Would his 50% share still be divided equally 3 ways or could he choose to leave his 50% to his new wife or sole child?"

He could change his will at any time (and so could you if you were the survivor).

The usual way that this is dealt with is that each parent leaves their own 50% share to their own children. In that situation, your children would get 25% each and his child would get 50%.

But you say that you want to ensure that each child gets an equal amount.

This cannot be guaranteed at all. But the nearest you can get would be if you left your 50% to your children and your DH left his 50% two-thirds to his own child and one-third split between your children.

In this way, they would each end up with one-third each of the entire estate of both of you.

"I’m sure it’s been done thousands of times before by solicitors!"

Yes, it is a common thing.

The trust is usually written to allow this to happen.

If a house in a trust is sold then the will is usually written in a way that allows the Trustees to use some or all of the trust money to buy a different home which is held for the benefit of the liferenter on the same trusts.

How much the surviving spouse can then take out depends on what they agree with the Trustees (the Trustees will typically be the surviving spouse and the children).

It's probably easiest to use some examples.

Your house is worth £400k and your DH has passed away leaving his 50% share of the house in a liferent trust.

You wish to downsize (and the will is written so that you can sell the property) to a house worth £200k.

All of the Trustees agree to do this. The Trustees then decide how much of the Trust money they will use towards the purchase of the new home.

They may decide to purchase 50% of the new property along with you. So you and the Trust will each own 50% of the new home and have £100k in cash.

You can go out and blow that £100k however you like.

The £100k that is still in the Trust however, remains in the Trust (your DC don't get it yet). The money must be invested and any income (interest, dividends etc) go to you rather than the Trust.

So the Trustees must take account of both you and the beneficiaries of the trust and so invest that money in a mix of investments that provide capital growth (good for the beneficiaries) and income (good for you).
.

The Trustees may instead agree to purchase any other percentage of the new home (or none at all).

For example, if the Trust put up £150k towards purchasing the £200k house then the Trust would own 75% of the house and have £50k in cash. You would then own only 25% of the new house and have £150k cash.

"You can go out and blow that £100k however you like"

Just wanted to check this is correct?
I was under the impression that any surplus money from downsizing went into the trust pot, as it's not your money to spend?

If you then read my next line:

"The £100k that is still in the Trust however, remains in the Trust (your DC don't get it yet). The money must be invested and any income (interest, dividends etc) go to you rather than the Trust."

When the house is sold, the share of the house that belongs to the Trust, and any money left over after downsizing, still belongs to the Trust and must be used as directed by the terms of the Trust.

In the OP's case, she personally owns the other 50% of the house and she can do with that whatever she likes.

From what I understand when we made our wills, assuming you die first, your 50% goes into the trust and will be protected if the house is sold. There is nothing stopping your DH changing his will at that point so his half doesn’t go into the trust, and he could theoretically blow the lot and exclude your DCs from his share.

There is no cast iron way of making sure all 3 DCs get the same, you just have to trust that your DH will do the right thing. This is the nearest thing to safeguarding your assets as you can get.

You also need to consider that if your DH needs care after you die, there may not be any of his 50% left, but at least your half will be protected.

Another thing you can do is appoint trustees who absolutely understand your wishes and state clearly that you want your share to go between all 3 DCs, but in the event that DH reneges on his side of the bargain you want your share to go to your 2 DCs only. At the end of the day it’s up to the trustees to pay the money out.

@Another2Cats
Thank you :)
My fault for skim reading!
I know OPs house is jointly owned, we have similar going on in the family at the moment, but one person owns the property - it was bought before their relationship began, it it may be a bit big for the survivor to manage on their own - which is where the downsizing may come in

My situation is made easier as OH has no children.

I knew my mother had done a trust deed for her house. It was only after she died that I discovered the trustees were her solicitor, my XH and me. I've no idea how it could have been legal as I'd never been told I was a trustee snd had never signed anything.

I have this. There isn't a Trust involved - just that DH can live in the house for the rest of his life. If they choose to sell (DH and 2xDCs have to agree) he gets a third of the value. He owns another property from before we married. House is in my name only and mortgage was only a few years short of getting paid off when we married and he didn't contribute to mortgage but did for bills.
My lawyer was very helpful. I'm in Scotland.