Life tenant Definition

GLOSSARY

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What does Life tenant mean?

A beneficiary entitled to the income of the trust fund for life or to the use of trust assets.

The life tenant is not entitled to capital held for the beneficiaries in remainder on the termination of the life interest. Put very simply, income is payable to A for life and on A's death B receives the capital. The beneficiaries may be named within the clause or defined terms may be used.

Private Client and Trusts

A beneficiary entitled to the income of the trust fund for life or to the use of trust assets.

View the related practice notes about Life tenant

Creation of trusts—life interest trusts

The nature of a life interest trustIn its basic form the life tenant is entitled to income produced by the trust fund or to the use of trust assets. The life tenant is not entitled to capital held for the beneficiaries in remainder on the termination of the life interest. Put very simply, income is payable to A for life and on A's death B receives the capital. The beneficiaries may be named within the clause or defined terms may be used.The term 'interest in possession' has been considered to include:•life interest trusts•any trusts under which a beneficiary has an immediate right to income as it arisesReasons to consider using a life interest trustThe motive for creating a life interest trust is usually the desire to:•protect the capital,•ensure that it devolves on A's death to B•provide an income to a beneficiary eg because they are a spendthriftIt is common to give added flexibility by enabling the trustees to terminate the interest in possession and to apply capital and income for...

Contents of Wills—rules of apportionment

The rules of apportionment should be considered at the moment of drafting the Will. Whenever a Will creates a trust, some rules of apportionment may be applied or excluded unless they have been dealt with expressly in the wording of the Will.Essentially, the purpose of the apportionment rules is to strike a balance between those interested in the capital of the trust (the remaindermen) and those interested in the income derived from that capital (the life tenant). These rules have been set out in cases and by statute.In the main, the reasoning behind the rules was that a testator, had they thought about it, would probably have wanted the trustees to maintain that balance. Therefore, equity intervened to presume that intention on behalf of the testator. As the principle of apportionment was always to be presumed, there was no necessity to seek any evidence of intention to include the rule (although evidence would be needed to dispel the presumption).Trusts (Capital and Income) Act 2013The relevance of the rules had been...

Discover our 76 Practice Notes on Life tenant

Clause—gift of property on life interest trust

Clause—gift of property on life interest trust 1 Gift of property 1.1 I give free of tax my property known as [full address and description of the property] or such other property which I may own as my main residence at the date of my death (the Property) together with all furniture, soft furnishings and articles of domestic, household or garden use or ornament in or about the Property (the Contents) to my Trustees on the following trusts. 1.2 In this clause the Property Fund shall mean the Property and the Contents and all property from time to time representing the same. 1.3 My Trustees shall hold the Property Fund for [full name of life tenant] of [address of life tenant] (the Life Tenant) for life and after the death of the life tenant for [name(s) of remaindermen] absolutely. 1.4 My Trustees shall impose on the Life Tenant as a condition of the Life Tenant’s residence in the Property and use of the Contents...

Will—to spouse absolutely, then to children on flexible life interest trust

Will—to spouse absolutely, then to children on flexible life interest trust FORTHCOMING CHANGE: At Spring Budget 2024 on 6 March 2024, the government announced its intention to move to a residence-based regime for the purposes of liability to IHT, rather than the current system which is largely based on domicile. The government will publish a consultation later in the year, followed by draft legislation. Questions to be considered will include a ten-year exemption period for new arrivals and a ten-year ‘tail-provision’ for those who leave the UK and become non-resident. No changes to IHT will take effect before 6 April 2025. For more information, see News Analysis: Spring Budget 2024—Private Client analysis — International. See also Practice Note: Domicile. 1 Revocation I [full name of testator] of [address of testator] revoke all former testamentary dispositions made by me[ to the extent that and so far only as they affect my property of every kind in the United Kingdom of Great Britain and Northern Ireland]...

Dive into our 7 Precedents related to Life tenant

Where a life tenant makes a potentially exempt transfer by surrendering the life interest to the remaindermen on the basis of an actuarial valuation and then dies within seven years; is any resulting inheritance tax liability the responsibility of the life tenant's executors or the trustees?

Where a life tenant makes a potentially exempt transfer by surrendering the life interest to the remaindermen on the basis of an actuarial valuation and then dies within seven years; is any resulting inheritance tax liability the responsibility of the life tenant's executors or the trustees? The underlying premise in respect of life interest trusts and inheritance tax (IHT) is that the life tenant is deemed to own the trust assets for IHT purposes. However, should the life tenant as beneficiary dispose of their interest in possession (and here we are assuming that the life interest in this scenario is a qualifying interest in possession (QIIP)) the beneficiary is treated as terminating the interest (section 51 of the Inheritance Tax Act 1984 (IHTA 1984)) and is thus making a transfer of value by virtue of IHTA 1984, s 52(1). In this scenario, consideration was received and this amount was deducted from the value of the property in which the interest subsisted. Typically, the consideration received for...

When a life tenant dies do the trustees need to notify HMRC?

When a life tenant dies do the trustees need to notify HMRC? For the purposes of this Q&A we have assumed that the life tenant has a qualifying interest in possession. See Practice Note: The meaning of qualifying interest in possession. In practice, returns should be filed if there are tax consequences arising out of the death of the life tenant. See Practice note: Qualifying interest in possession trusts—IHT treatment. This covers the IHT position on the death of the life tenant with a qualifying interest in possession. See also Practice Note: Trusts—IHT

See the 164 Q&As about Life tenant

Will interpretation prevents charitable relief being claimed by estate (Marks (Executor of Hilda Marks) v Revenue and Customs Commissioners)

Private Client analysis: The case was an appeal against Notices of Determination issued by HMRC regarding the estate of Mrs Hilda Marks (HM). There were two key issues for consideration in this case: whether the charitable giving condition in Schedule 1A of the Inheritance Tax Act 1984 applied to reduce the rate of IHT payable by the estate; whether a 'Kosher holiday let' apartment in Bournemouth qualified for BPR. In each case, the HMRC determinations were upheld. As to whether the charitable rate applied, the competing arguments were based upon differing interpretations of the relevant Will and the associated impact on the IHT calculations. This will be of particular interest for those involved in the administration of estates and trusts which provide for charitable gifts, or the associated drafting. For the latter, this is another in a list of cases where HMRC have successfully challenged a claim for BPR for holiday letting businesses. There were some interesting additional services provided in this case but a lack of evidence of these...

Private Client weekly highlights—18 July 2024

This week’s edition of Private Client highlights includes: (1) a judgment by the Court of Protection on the best interests of a patient, (2) analyses of the King’s Speech, (3) updates to the HMRC Manuals this week, (4) new content published this week, and (5) our ‘Question of the week’.

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