A life interest in a will is a type of trust created by the will which allows for a beneficiary (known as the "life tenant") to receive the benefit of an asset (i.e. a property) for the remainder of their life.
In the case of a property, the life tenant is not transferred the ownership of the property, but rather the property is held by the Executors for the life tenant to occupy, rent free, for the rest of their life. The life tenant is usually responsible for maintaining the property and paying all rates and outgoings; however they are also usually entitled to income generated from the asset.
A major advantage of a life interest is that you can elect someone to receive the benefit of the asset during their lifetime, and then upon their death, nominate who should receive the asset outright.
In blended family situations where you have a second spouse or partner, and children from a different relationship for example, a life interest may be beneficial as you can elect for your spouse/partner to receive a life interest in your property, and then upon their death, the property is to go to your children.
A life interest is governed under the "Settled Land Act", which importantly provides that if a life interest is created under a Will, there must be two trustees (Executors) appointed to govern the trust.
It is important that if you wish to include a life interest in your will you work with an experienced wills lawyer to ensure that the life interest is drafted appropriately. One important factor to consider is what happens if the beneficiary of the life interest needs to move to a nursing home or retirement village. An approach to this is to have the provision structured to allow the life tenant to sell the property if necessary say to move into a nursing home or retirement village. Upon the life tenant's death, the refund from the nursing home or retirement village is then dealt with in accordance with the Will.
Depending on your circumstances, a life interest could be a very helpful trust to include in your will. A Will & Powers of Attorney lawyer at OFRM can look at your circumstances to advise whether this is advantageous to your particular situation, and also ensure you comply with the relevant legal requirements. Call us on 03 5445 1000.