Life Interest Trusts: How They Work for Second Marriages and Blended Families

Second marriages and blended families create a dilemma that a standard Will handles badly. You want to look after your new partner if you die first, but you also want your own children, perhaps from an earlier relationship, to inherit what you intended for them. Leave everything to your partner outright, and you have to hope they honour your wishes. A life interest trust removes the hope and replaces it with a guarantee.

This article explains the dilemma, how a life interest trust solves it, and what it means for tax.

What Is the Blended Family Dilemma?

If you leave your entire estate to your new husband or wife, it becomes theirs to do with as they wish. They can spend it, leave it to a new partner, or write your children out of their Will entirely. Most people never intend that outcome, but a straightforward Will cannot prevent it once you are gone.

The instinct to provide for a partner is right. The risk is that providing for them outright quietly disinherits your own children.

What Is Sideways Disinheritance?

Sideways disinheritance is the name for exactly this. A couple leave everything to each other. The survivor later meets someone new, remarries, and changes their Will in their favour. When the survivor dies, the children of the first relationship receive nothing, because the whole estate has passed sideways to someone who was never part of the original family.

It is one of the most common and most preventable threats to a family’s inheritance, and most people have never heard the term until it is too late.

What Can Go Wrong Without a Life Interest Trust?

Consider a couple, each with children from before. One owns the family home. They leave everything to each other outright, trusting it will all work out. When the first partner dies, the survivor inherits the lot. Years later the survivor remarries, changes their Will, and on their death the home and savings pass to the new spouse. The first partner’s children, the ones the home was always meant for, inherit nothing.

Nothing improper has happened. The survivor was entitled to do all of it. That is precisely why a guarantee, rather than a hope, is what protects your children.

How a Life Interest Trust Solves It

Instead of leaving your share of the estate to your partner outright, you leave it in a life interest trust. Your partner, the life tenant, keeps the right to live in the home and benefit from everything as normal, for the rest of their life. Your children are named as the remaindermen. When your partner no longer needs to benefit, your children receive at least your original share, whatever has happened in between, including any remarriage.

Your partner is secure. Your children are certain. Both duties are met at once. A life interest used this way is sometimes called a right of occupation trust when it centres on the family home.

How Is a Life Interest Trust Taxed?

A life interest trust created by a Will is an immediate post-death interest. 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 of the trust is treated as part of their estate and taxed in the normal way, using the allowances available then. It is not a way to avoid 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.

Frequently Asked Questions

Can I leave everything to my second husband or wife and still protect my children?

Not with a straightforward outright gift, because once your partner inherits, the estate is theirs to redirect. A life interest trust is the usual solution: your partner benefits for life, and your children are guaranteed to inherit your share afterwards, whatever your partner later decides or whoever they marry.

What is a right of occupation trust?

A right of occupation trust is a life interest trust focused on the family home. It gives a surviving partner the legal right to live in the property for their lifetime, or for a defined period, while ensuring the property itself ultimately passes to your chosen beneficiaries, usually your children.

Does my partner have to move out?

No. That is the point of the arrangement. The life tenant has the right to remain in the home for their lifetime, or for whatever period you set. Your children inherit only once your partner no longer needs the home, so your partner’s security and your children’s inheritance are both protected.

TL;DR: Life Interest Trusts for Second Marriages and Blended Families

A life interest trust lets you provide for a new partner for life while guaranteeing your own children eventually inherit your share, which is the reliable answer to sideways disinheritance.

• Leaving everything to a partner outright risks your children being disinherited later.
• A life interest trust gives your partner security and your children a guaranteed share.
• It prevents sideways disinheritance, where a survivor remarries or changes their Will.
• Spouse exemption usually means no inheritance tax on the first death if the life tenant is your spouse.
• It does not avoid your own care home fees, and a consultation confirms whether it fits your family.