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Blended families are becoming increasingly common across the UK, with around 781,000 stepfamilies recorded in 2021. While second relationships can bring tremendous joy and companionship, they also create complex estate planning challenges. If you have children from a previous relationship and a new partner, you’ll likely face a difficult question: how do you provide for your spouse whilst ensuring your children ultimately inherit what you intend for them?
This is where sideways disinheritance becomes a real concern, and a Life Interest Trust can offer the solution you need.
Sideways disinheritance occurs when the inheritance you intended for your children inadvertently ends up elsewhere. This happens more often than you might think in blended families.
Here’s a common scenario: You leave everything to your partner, trusting they’ll honour your joint wishes to pass assets to your children from a previous relationship. However, life doesn’t always go according to plan. Your partner might:
In any of these situations, your children could receive nothing from the inheritance you intended for them. It’s by far the number one concern we hear from clients in blended families, and it’s entirely preventable with the right planning.
A Life Interest Trust (also known as an Interest in Possession Trust or Flexible Life Interest Trust) allows you to provide security for your partner whilst protecting your children’s inheritance. It’s a legal arrangement that gives someone the right to benefit from an asset during their lifetime, without actually owning it outright.
Here’s how it works in practice:
When you pass away, your share of an asset (typically the family home) doesn’t pass outright to your surviving partner. Instead, it’s placed into a trust. Your partner becomes the “life tenant” and has the right to:
Crucially, your partner cannot change who ultimately receives the asset. When they pass away (or if certain conditions are met, such as remarriage or cohabitation), the trust assets pass to your chosen beneficiaries usually your children. This arrangement guarantees that your children will inherit your share, regardless of what happens after your death.
For a Life Interest Trust to work with property, you must own your home as “tenants in common” rather than “joint tenants.” This is a critical distinction that many couples overlook.
Joint tenants means you and your partner each own 100% of the property together. When one of you dies, the property automatically passes to the survivor, regardless of what your will says. You cannot leave your share to anyone else.
Tenants in common means you each own a defined share (typically 50% each). This allows you to leave your share in your will to whomever you choose in this case, into a Life Interest Trust for your partner’s benefit, with your children as the ultimate beneficiaries.
Changing from joint tenants to tenants in common is straightforward. A solicitor prepares a Notice of Severance, which you both sign. This is then registered with the Land Registry. The process is relatively simple and the costs are minimal compared to the protection it provides.
Life Interest Trusts have become increasingly popular, and for good reason. They offer several key advantages:
Security for your partner
Your surviving partner has the absolute right to live in the family home. They won’t face the uncertainty of being dependent on your children’s goodwill or the fear of being forced to sell. This provides genuine peace of mind at what will already be a difficult time.
Protection for your children
Your children’s inheritance is guaranteed. Even if your partner remarries, changes their will, or lives for many more decades, your share of the property is ring-fenced for them. This is particularly important in blended families where relationships between stepchildren and stepparents can be complex.
Flexibility for changing circumstances
The trust can be structured to allow for downsizing or moving house. If your partner wants to live closer to family or in a more manageable property, they can sell and move. The trust simply transfers to the new property, maintaining the same protections.
Many trusts also include provisions allowing trustees to advance capital if needed perhaps to help with unexpected expenses or to provide a deposit for one of your children.
Potential protection from care home fees
Because your share of the property is held in trust and doesn’t belong outright to the surviving partner, it may not be counted when the local authority assesses their ability to pay for care. Only the partner’s own 50% share would typically be considered.
It’s crucial to note that the trust must be set up for legitimate estate planning reasons protecting your children’s inheritance and providing for your partner rather than purely to avoid care fees. Deliberately depriving yourself of assets to avoid care costs is not permitted, but genuine estate planning that happens to have this benefit is entirely legitimate.
Maintaining family harmony
Clear legal arrangements reduce the potential for disputes. When everyone understands the arrangements from the outset, and these are set out in legally binding documents, there’s less room for misunderstanding or conflict between your partner and your children.
Your will appoints trustees to manage the trust. Choosing the right trustees is important because they’ll be responsible for ensuring the trust operates correctly and balancing the interests of the life tenant (your partner) and the remaindermen (your children).
Many people appoint:
Professional trustees charge for their services, but they bring knowledge, impartiality and experience in managing sometimes delicate family dynamics. This can be invaluable, particularly in more complex situations.
Whilst Life Interest Trusts offer significant benefits, they’re not suitable for everyone. Here are some factors to consider:
Less flexibility for the surviving partner
Your partner will only have the right to live in the property or receive income from trust assets they cannot simply sell and spend the capital. Whilst trustees can often advance money if needed, your partner may feel restricted compared to owning assets outright. This is worth discussing openly before putting arrangements in place.
Administrative requirements
After your death, the trust must be formally established, which involves obtaining probate and registering the trust arrangements with the Land Registry. There are costs involved in setting this up and potentially ongoing administration costs. These should be weighed against the benefits the trust provides.
Inheritance tax considerations
Life Interest Trusts are generally inheritance tax efficient for married couples and civil partners. When the first spouse dies, the spouse exemption means no inheritance tax is payable at that point. When the surviving spouse dies, the trust assets are typically included in their estate for inheritance tax purposes, but the estate benefits from both partners’ nil-rate bands.
However, if a Life Interest Trust is set up during your lifetime rather than through your will, different inheritance tax rules apply. Always seek specialist advice on your specific circumstances.
Long-term commitment
Once established on your death, these trusts can last for decades. Whilst they protect your children’s inheritance, they also mean assets are tied up until the trust ends. Your children cannot inherit until your partner passes away or another condition (such as remarriage) is met.
Life Interest Trusts are particularly beneficial if you:
They’re also useful where there’s been a long first marriage with children, followed by a second relationship later in life. You want to provide for your new partner without disadvantaging the children from your first marriage.
Setting up a Life Interest Trust requires careful planning and expert legal advice. The trust must be drafted to suit your family’s specific circumstances, your relationship with your partner, and your children’s needs.
Key steps include:
At RLK Solicitors, we specialise in helping families navigate these complex decisions. We understand that every family situation is unique, and we take time to understand your circumstances, your concerns, and your goals before recommending the right approach.
Our experienced Wills, Trusts & Estate Planning team can guide you through the entire process, from severing your tenancy to drafting comprehensive wills that protect everyone you care about.
Blended families bring joy but also require thoughtful planning to protect everyone’s interests. A Life Interest Trust offers a powerful solution that provides security for your partner whilst guaranteeing your children receive the inheritance you intend for them.
By taking action now, you can avoid the heartache and conflict that sideways disinheritance can cause. You’ll have clarity about what happens to your estate, your partner will have security, and your children will know their inheritance is protected.
Don’t leave your family’s future to chance. Contact RLK Solicitors today on 0121 450 7800 or email enquiries@rlksolicitors.com to discuss how a Life Interest Trust could protect your family’s future.
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