Life Interest Settlements
Achieves:
An offshore trust whereby a certain individual can benefit during their lifetime and upon their death then certain other individuals can benefit from the assets.
Requires:
This form of trust is most commonly used by UK resident, non-UK domiciled individuals. Although it can be used by residents anywhere in the world on a tax neutral basis.
How it works:
The main difference between a standard discretionary trust and a life interest settlement is that the settlor or life tenant maintains a defined interest in the settlement. The settlor establishes the settlement in the normal way by executing a trust deed and settling assets into the trust however the settlor also appoints the life tenant. This can be the settlor or any other beneficiary. The life tenant has enjoyment over the trust assets during their lifetime, this usually takes the form of receiving all of the income generated or can be by way of living in a property that the trust owns.
Upon the death of the life tenant the remaining beneficiaries then have access to the income and capital of the trust fund in very much a similar way to that of a discretionary trust.
Life interest settlements have uses for mitigating capital gains tax for non-UK domiciled clients amongst many other situations.