What Is a Life Interest in a Will?

A Life Interest (also known as a life tenancy or life estate) is a legal arrangement that grants someone the right to use or benefit from an asset for the duration of their life without actually owning it. After their death, the asset passes to another person or group, as specified in the deceased person’s Will.

For example, a common arrangement is where a Willmaker leaves a property to a beneficiary for their lifetime but ensures that the property will eventually pass to another individual or group after the beneficiary’s death. The person who receives the Life Interest is known as the “life tenant”, and they can enjoy the asset, whether it is a property, income from investments, or other assets, for the duration of their life.

How Does a Life Interest Work?

The terms of a Life Interest are typically set out in a Will. Here’s how it works in practice:

Life Tenant Rights

The person granted a Life Interest (the life tenant) has the right to live in or benefit from the asset for as long as they are alive.

This could mean living in a house, receiving rental income from real estate, or earning income from investments such as stocks, bonds, or businesses.

After Death

Once the life tenant passes away, the asset reverts to another person or group designated by the Willmaker.

The life tenant has no right to leave the asset to anyone in their own Will because they don’t own the asset; they only have the right to use or benefit from it during their lifetime.

Restrictions

Life Interests usually come with certain conditions.

For example, the life tenant may be responsible for the upkeep and maintenance of the asset (such as a house) but can not mortgage or transfer ownership.

Types of Life Interests

Life Interests can come in a few different forms, depending on the type of asset and the intentions of the deceased:

Life Interest in Property

The most common type of Life Interest involves real estate.

For example, a person may leave a family home to a surviving spouse for their lifetime on the understanding that it will pass to children or other beneficiaries after the surviving spouse’s death.

Life Interest in Income

A Life Interest can also involve the right to receive income from an asset, such as dividends from stocks or interest from a savings account, for the lifetime of the beneficiary.

Once the life tenant passes away, the asset is dealt with according to the terms of the Will.

Residuary Life Interest

In some cases, a Willmaker will leave their estate to a beneficiary, but with a Life Interest granted to another individual (such as a spouse).

This means the spouse will benefit from the estate during their lifetime, and the remainder will pass to the designated beneficiaries after their death.

Can You Sell a Property with a Life Interest?

In most cases, a life tenant cannot sell the property outright because they do not hold full legal ownership, only a right to use or benefit from it during their lifetime. The underlying ownership rests with the remainderman (the person or group entitled to receive the property after the life tenant’s death).

However, if all parties involved agree, namely the life tenant and the remainderman, it may be possible to sell the property together. In such instances, proceeds from the sale would typically be split in a way that reflects each party’s legal interest, often concerning the life tenant’s age and life expectancy. Legal advice should always be sought to ensure the interests of all parties are protected and that any action complies with the terms of the Will.

Contact Us

Life Interests are an important tool in estate planning, allowing people to provide for loved ones during their lifetime while ensuring that assets are preserved for future generations.

If you’re unsure whether a Life Interest is the right choice for your estate plan, contact Bambrick Legal today. We offer a free, no-obligation 30-min consultation for all enquiries.