Key Facts
- A flexible life interest trust, or FLIT, combines a life interest with discretionary powers, so one person benefits for life while trustees can still adapt if circumstances change.
- It gives a surviving partner the security of a life interest and gives trustees room to respond to a family that looks different in twenty years’ time.
- On the first death, if the life tenant is your spouse, spouse exemption usually means no inheritance tax at that point.
- It suits blended families and estates where you want certainty now but cannot predict what your family will need later.
- A FLIT is not a way to avoid your own care home fees.
A flexible life interest trust, usually shortened to FLIT, answers a problem that catches out a lot of couples. A plain life interest trust gives your partner security for life and guarantees your children inherit afterwards, but it is fixed. Life is not. A FLIT keeps that security while giving your trustees the power to adapt if your family’s needs change in ways you could never have predicted when you wrote your Will.
This article explains what a FLIT is, how the flexibility works in practice, how it is treated for tax, and the kind of family it suits.
What Is a Flexible Life Interest Trust?
A FLIT starts life as a life interest trust. One person, the life tenant, usually a surviving spouse or partner, has the right to benefit from the trust for the rest of their life, for example by living in the home or receiving the income from investments. Your chosen beneficiaries, usually your children, are named to inherit afterwards.
What makes it flexible is a layer of discretionary powers sitting on top. Your trustees can, if the circumstances justify it, do more than simply preserve the capital: they can advance money to other beneficiaries, or adjust who benefits within the group you have defined. You get the certainty of a life interest and the adaptability of a discretionary trust in a single structure.
How the Flexibility Works in Practice
Picture a couple in a second marriage. You want your new partner secure for life, and you want your children to inherit in the end. A plain life interest does that. But what if, years after you die, one of your children falls seriously ill and needs help long before your partner’s interest would naturally end? A rigid trust cannot respond. A FLIT can, because your trustees have the discretionary power to step in.
The flexibility is guided, not unlimited. You choose the trustees, you define the group of people who can benefit, and you leave a letter of wishes explaining how you would want the powers used. Your partner’s core security stays intact; the discretion is there for the situations you could not foresee.
How a FLIT Is Taxed
For the life tenant’s interest, a FLIT created by a Will is treated as an immediate post-death interest, the same footing as an ordinary life interest trust. If the life tenant is your spouse or civil partner, spouse exemption usually means there is no inheritance tax when you die. When the life tenant later dies, the value they were entitled to is treated as part of their estate and taxed in the normal way, using the allowances available then.
The discretionary powers can bring their own tax treatment for anything that sits outside the life interest, which is one reason a FLIT should be drafted and reviewed with proper advice rather than picked off a shelf. As with every trust, it is not a device for avoiding your own care home fees.
Inheritance tax rules, reliefs and thresholds change over time and depend on your circumstances. Always take current, tailored advice before relying on any figure.
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Is a FLIT Right for You?
A FLIT earns its place where you want to look after a partner for life but cannot predict what your children or wider family will need in the decades ahead. Blended families, estates with dependants of very different ages, and situations where flexibility genuinely matters are where it comes into its own.
If your family is straightforward and a plain life interest would do the job, the extra flexibility of a FLIT is complexity you may not need. A free consultation is there to work out which structure fits, and to recommend the simplest one that achieves what you want.
Frequently Asked Questions
What is the difference between a FLIT and a normal life interest trust?
A normal life interest trust is fixed: the life tenant benefits for life and the named beneficiaries inherit afterwards, and that is that. A FLIT keeps that arrangement but adds discretionary powers, so your trustees can adapt, for example by helping another beneficiary early, if circumstances change in ways you did not foresee.
Who controls a flexible life interest trust?
Your trustees do, within the boundaries you set. You choose them, you define who can benefit, and you guide them with a letter of wishes. They protect the life tenant’s core security while holding the discretion to respond to changing needs, which is why choosing trustees you trust is so important.
Does a FLIT avoid inheritance tax or care fees?
No. The life interest is treated as part of the life tenant’s estate for inheritance tax, and no trust created by a Will protects your own assets from your own care home fees. A FLIT is about security and flexibility for your family, not about escaping tax or care costs.
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TL;DR: Flexible Life Interest Trusts (FLITs)
A FLIT gives a partner the security of a life interest while giving your trustees discretionary powers to adapt, making it the flexible answer when you cannot predict what your family will need later.
- It combines a life interest with discretionary powers in one trust.
- The life tenant is secure for life; your children inherit afterwards.
- Trustees can adapt within the boundaries you set, guided by your letter of wishes.
- Spouse exemption usually means no inheritance tax on the first death if the life tenant is your spouse.
- It suits blended families and unpredictable circumstances, but does not avoid your own care fees.