Mutual life interest wills may be a simple but effective alternative to a Trust
A number of clients when reviewing their wills have discussed with us the possibility of setting up trusts but have found that the time to complete the gifting programme involved has been such that they are unlikely to achieve the outcome they are looking for of structuring their affairs in a way that would potentially maximise the amount of their estate that was left for the benefit of their children.
Life interest wills may go some way towards achieving this outcome without the need to undertake lengthy gifting programmes.
Each will provides a life interest to the survivor of the couple with possibly a discretion to enable some income to be paid to children during the lifetime of the survivor.
As well as completing the new wills usually most of the assets held by the couple are split into two distinct half shares, each half held in the sole name of one of the couple. A deed should also be completed between the couple whereby it is agreed that neither one will alter their will to remove the life interest without the consent of the other.
Two trustees are required in each will to ensure that the interest in the estate of the first of the couple to die is kept separate from the survivor's interest in any jointly held property.
Subsequently, on the death of one of the couple the assets held in the name of the survivor are only half what they would be if survivorship had applied and the couple's assets had all transferred to the survivor. This may well enable the survivor to obtain a residential care subsidy earlier should the survivor need permanent hospital care. Assets in the deceased spouse/partner's estate are not included in the assessment of the value of the survivor's assets for subsidy purposes.
Usually the survivor has reasonably full use of the assets in the deceased spouse/partner's estate for their lifetime and the income from them.
