Posted on 4th October 2013

The Problem of "Life Interests"

By Elizabeth Armstrong, Partner and Manager of Trusts at Latimer Hinks Solicitors www.latimerhinks.co.uk.

In our modern society it is not unusual for people to be part of more than one family over their lifetime. As divorce rates increase, so the need for awareness over property ownership issues becomes more pressing.

You lose your partner (whether through divorce or death) and, some years later, find a new partner. Your new partner and you live in the house that you own. You want to provide a home for your new partner whilst both of you are alive, and continuing if necessary after your death. Once your new partner dies, you want your property to go to your children not to the estate/family of your new partner.

One way of approaching this potentially problematic issue is to make a will giving a "life interest or "interest in possession to your new partner with the property to revert to your children on your new partner's death. A life interest is where a person is given an interest in a property for life or for a shorter period of time e.g. until his/her remarriage. When that interest ends the interest passes to children/other named individuals. These children or other specified persons are said to have a "reversionary interest in the property.

This is an option that, in the right circumstances, can work well.

It is usual, when creating a life interest, to establish obligations, which bind the holder of that interest. For example, the life-interest holder is usually bound to keep the property insured, pay the interest on any mortgage debt and keep the property in good repair. Life interests often last for many years and the property may need significant maintenance and repair over that time, so responsibilities need to be spelled out.

When a person gives to another a life interest, it is normally their intention to give a benefit, not a burden. So when these arrangements are under consideration thought should be given to the future costs of upkeep of the property. Where there is the means to do so cash can be added to the life interest fund to cover these costs.

Anyone in this type of situation should seek expert legal advice at an early stage so as to be able to consider all the possibilities/options.