Trusts can be created in many guises, but here we will look in detail at interest in possession trusts.
This is a type of trust whereby the beneficiary, sometimes known as the life tenant, receives the trust income as it arises.
What is an example of an interest in possession trust?
You may own shares, and the trust may include a description of how the income from these investments is distributed. It could be left to your partner, for example, for the duration of their life, and the shares will then pass to any children. In this case, the partner has an interest in possession but cannot claim the shares.
Alternatively, a property could be left in trust and the life tenant allowed to live in it rent-free, thereby benefiting without outright ownership. It should be noted that the trustees cannot gather the income.
If you are interested in setting up an interest in possession trust, a London law firm, such as //www.forsters.co.uk, will be able to advise you.
Who has the rights to the trust fund?
The life tenant has the right to income from the trust but not the capital. The trustees may have discretionary powers on how to release it, or the trust may specify that it goes to named beneficiaries after the life interest comes to an end. These named beneficiaries are referred to as the remaindermen.
The trustees are the legal owners of the assets of the trust and any investments and must use their powers in the best interests of the beneficiaries.
