Incorporating a Flexible Life Interest Trust (FLIT) into a will can offer powerful advantages for managing and protecting assets whilst providing for loved ones after a person has passed away. In this post we’ll explore why a FLIT is an essential part of a modern estate plan and the types of assets it can help to distribute to beneficiaries.

What is a Flexible Life Interest Trust?

A Flexible Life Interest Trust is a type of trust that allows the person making the Will to provide for multiple beneficiaries in a flexible way. It offers protection and income to one or more primary beneficiaries (often a spouse or partner) during their lifetime whilst preserving the capital of the estate for other beneficiaries, typically children or grandchildren after the primary beneficiary who may also be known as the life tenant.

The structure enables the trustee (the person managing the trust) to adapt to changing financial needs, family circumstances and tax laws which can prove to be a major advantage.

What are the benefits of a Flexible Life Interest Trust?

• Asset Protection

By placing assets within the trust they can be protected from threats such a spouses remarriage, financial mismanagement or claims from third party creditors. If the surviving spouse remarries after the first death, the trust protects the deceased persons share of the estate from passing outside of the family line ensuring that children or other designated beneficiaries still inherit as intended.

• Tax Efficiency

A FLIT allows for more strategic tax planning and potentially minimizing the tax burden on a joint estate.  After second death the tax burden for future generations can also be reassessed and actively managed.

• Control and Flexibility

One of the key strengths of the FLIT is flexibility. Whilst the life tenant (often the spouse) is entitle to the income generated by the trust, the trustees have the discretion to allocate some or all of the capital to other beneficiaries if needed. This could be crucial in scenarios where children or grandchildren need financial assistance during the lifetime of the life tenant.

• Ensuring provisions for dependents

A FLIT ensures that loved ones are taken care of without giving them unrestricted access to assets that may need to be managed or protected for future generations.

What assets can a Flexible Life Interest Trust help to distribute?

A FLIT can help to distribute a wide range of assets making it a highly adaptable toll in estate planning such as;

1. Real estate i.e. property

Properties can be placed into trust and allow the life tenant (often the spouse) to continue receiving the benefit of the asset i.e. rental income. After their death, the property can be passed on to designated beneficiaries. The family home may need to be dealt with slightly differently to ensure additional tax allowances such as the Residence Nil Rate Band allowance are not compromised.

• Investment portfolios

Stocks, bonds and other investment portfolios can generate income for the life tenant whilst the underlying capital remains intact for future beneficiaries. This will help to ensure investments continue to work for families over time.

• Cash and savings

Funds held in savings accounts and cash investments can be included in the trust. The trustees can distribute the income generated from these assets to the life tenant whilst the capital remains protected.

• Personal possessions

Valuable personal items such as jewelry, art collections or heirlooms can be held with the trust. Whilst these assets may not strictly generate income, the trust can manage their distribution to ensure they remain within the family.

Protecting a legacy for future generations

A flexible life interest trust is an essential tool for anyone serious about protecting their wealth and ensuring their estate is managed in line with their wishes. It provides a safety net for loved ones, guarding against unforeseen life changes whilst offering the flexibility needed to adapt to future circumstances.

By incorporating a FLIT into a will, clients gain peace of mind knowing that;

• Their spouse and/or dependents will be financially supported
• Children or grandchildren will receive their intended inheritance
• Assets are protected from future risks such as remarriage or creditor claims
• The impact of inheritance tax can be reduced.

Estate planning is about more than just distributing assets, it about protecting assets for loved ones. A Flexible Life Interest Trust provides a smart, adaptable solution that ensures an estate is managed with care, efficiency and foresight and is an invaluable part of a Will.

By taking  professional advice, clients can explore how a Flexible Life Interest Trust can be tailored for their specific needs and goals whilst securing their legacy for generations to come.

If you have any questions, give us a call on 01522 500823 or enquires@btwc.co.uk