Dependent upon your family circumstances, it may be sensible to consider including a liferent provision in your Will. However, what is a liferent exactly and how may it benefit you?
What is a liferent?
A liferent can be used where you wish your spouse, for instance, to benefit from the income from your assets or be in a position to use those assets, without them having outright entitlement to/ownership of those assets. Instead, the assets will ultimately pass to others; most commonly, your children.
A liferent provides a means of control over the ultimate destination of an asset. The most common example of this being used in practice is in relation to property.
Take, for example, a widow with children by a former marriage. She may wish her current spouse or partner to have the right to occupy her house for a specific period of time, until a certain event happens or most commonly, until death of the ‘liferenter’. Thereafter, this asset would then pass to her own children.
Conversely, if that widow had left the house outright to her new spouse/partner under her Will, she would not be able to prevent him from completely changing his Will after her death, with the possibility that her children would receive nothing from her estate.
When is it useful?
Liferents can be particularly useful when wishing to protect assets for the next generation, but wishing to allow the use/benefit/income to be for the benefit of another party. They can give peace of mind that your inheritance is safeguarded for those you wish to inherit it.
However, incorporating a liferent trust within a Will may have Inheritance Tax and Capital Gains Tax consequences. Separately, it may involve amending the title deeds to your property. For instance, if you jointly own a property with your spouse and have what is called a “survivorship destination” contained in the title, this means that on the death of the first spouse, the property is automatically made over to the survivor. If a liferent is what is required, this “survivorship destination” would need to be removed from your title (called evacuating the survivorship destination) to allow for the liferent to take effect.
After the person making the Will dies (known as the granter or testator), legal title to the liferented assets usually has to be transferred into the names of the trustees (who are often also the executors) who will then hold them in trust to transfer to the ultimate beneficiaries when the trust comes to an end. Usually, the liferent trust ends on a person’s death or it can be renounced earlier.
Should you wish to discuss the practicalities and legal consequences of including a liferent provision in your Will or as part of your current future planning and how it may work for your family, please do not hesitate to contact a member of our Wills and Executries team who would be pleased to assist.