Ensure your loved ones are cared for with an Interest in Possession Trust, expertly handled by our trusted solicitors to support your partner and secure inheritance for future generations.
An Interest in Possession Trust (also known as an IIP), is a trust which holds assets, commonly property or businesses, in which there is a specific named beneficiary known as a ‘Life Tenant. A life tenant has the right to any income generated by the trust, or the right to occupy a property that is within the trust, rent-free.
Strictly speaking, a life tenant of an Interest in Possession Trust does not own the assets and cannot decide to whom the assets pass after their death, they only have the right to enjoy the assets for the time frame specified. Typically, the assets and trust are passed to the beneficiaries of the trust after a specified period of time, or in the event of the death of the Life Tenant.
IIP trusts can often come with conditions that the life tenant must abide by, such as:
Maintenance of the property.
Insurance of the property.
Paying the mortgage of the property.
Not remarrying, or allowing another to live in the property with them.
However these are completely optional, and we can discuss any conditions that you would like to place on your IIP Trust.
Inheritance in Possession Trusts have several uses, that make them a great option for passing on your inheritance, in a tax-efficient and legally secure manner. They are particularly useful for:
Ensuring your spouse or civil partner is protected and maintained for life.
While also ensuring that eventually, your assets will pass directly to your children or designated beneficiaries.
Assets and property are maintained properly before being passed down.
Reduce the complexity and costs associated with trust management.
Interest in Possession trusts can provide a number of benefits to the ‘Life Tenant’ and the beneficiaries. These benefits include, but aren’t limited to:
Income - An Interest in Possession trust can provide the beneficiary or ‘Life Tenant’ with a steady stream of income,
Accommodation - If the assets in the trust are property, it provides the Life Tenant with the right to live in a property that is owned by the trust, completely rent-free.
Tax Efficiency - An IIP trust can reduce the overall inheritance tax paid, maximising the amount passed on to beneficiaries.
Flexibility - Interest in Possession Trusts can give trustees control over how assets are distributed among beneficiaries. This is especially useful for accommodating changing circumstances, such as new grandchildren.
Protection of Assets - An IIP can protect business assets and ensure a smooth transition of ownership, as well as ensure property assets are maintained properly.
Our team of expert trust solicitors can provide you with a more comprehensive overview of how Interest in Possession trusts work and their benefits.
How an Interest in Possession trust is taxed depends on how and when it is created, and who the beneficiaries are.
For lifetime transfers (a gift made in someone’s lifetime), inheritance tax is charged when the trust is set up, whenever distributions are made, and every ten years.
Similarly, if the Interest in Possession trust was created by Will for someone other than a spouse, inheritance tax is charged in the same way: When the trust is created, when distributions are made, and every ten-year anniversary.
However, if the trust is created by Will for the benefit of a spouse, there is no tax paid on the trust’s creation, no charges on the exit of the assets, and no anniversary charges.
This makes setting up an Interest in Possession trust a financially effective way to leave assets to your spouse in the event of your passing, that will eventually pass to children, grandchildren, or other beneficiaries while minimising taxes paid.
Our Culver Law teams based in London and Cambridge are committed to providing you with the highest level of legal service and expertise, tailoring our services and the trust you need to your needs. Here are just a few of the ways we provide you with an exemplary service:
Individually Tailored Trusts: Our experienced team of trust solicitors will work with you, to create a trust that is tailored to your needs and desires, with our expert advice.
Service That Puts You First: Our focus is on you, and how we can support you and your wishes for the future. From your initial consultation, we provide a transparent legal service with clear communication that makes us easy to work with.
Compassionate Approach: We understand that creating trusts and Wills can involve complex and sensitive decisions about family, finances, and the future. We offer a compassionate approach, that makes sure your concerns and wants are heard and implemented.
Experts in Trust Law: We pride ourselves on years of experience in trust law, as well as staying up-to-date with the latest and emerging legal developments, ensuring that your trust complies with all current and future regulations.
44 Southampton Buildings, London
WC2A 1AP
Tel: 0203 889 0166
Company No. 13313009
9 Hills Road, Cambridge
CB2 1GE
Tel: 01223 653010
Company No. 13313009
44 Southampton Buildings, London. WC2A 1AP
Michael is a Court of Protection panel deputy for property and affairs. He is responsible for managing the money and assets of people unable to manage such matters for themselves. Michael has also acted as a health and welfare deputy for a number of clients, making decisions over matters where they are unable to make decisions for themselves.
Michael is a Chartered Tax Adviser (CTA) with the Chartered Institute of Taxation, a full member of the STEP, a dementia friends champion with the Alzheimer's Society and a member of the Association of Contentious Trusts and Probate Specialists (ACTAPS).
9 Hills Road, Cambridge. Cambridgeshire. CB2 1GE
Amy joined Culver Law as a partner in March 2023. She advises on all aspects of non-contentious Private Client work including Wills, Trusts, Estate Planning and Probate and specialises in advising older and vulnerable clients.
Amy is a Dementia Friends Ambassador and assists her clients to be involved in decisions relating to their affairs for as long as they are able. Amy has been learning British Sign Language and is currently studying for her Signature Level 6 Certificate.
Working with our legal team means you’ll be supported and guided through every step of the trust and estate planning process. Please get in touch with us to discuss your individual needs and wishes, and see how we can help.
When the life tenant of an Interest in Possession Trust dies, the trust assets are treated as a part of the life tenant beneficiary's estate. The estate executors must declare the value of the underlying assets on the life tenant’s estate.
Yes, like with most trusts in the UK, an Interest in Possession Trust is subject to an IHT charge known as the Principal Charge, or more commonly, the Ten-Year Charge. The calculation of the 10-year charge is complicated, but we will be able to explain in full how much will be paid if you decide to make us your trustees.
The costs of setting up an Interest in Possession trust can vary depending on the size and complexity of the estate you intend to place in the trust. We offer completely transparent pricing, with a detailed estimate from your initial consultation. Get in touch here, and we can provide you with an estimate of the cost.
Your trust will be registered with HMRC through the Trust Registration Service (TRS). As trustees, we will provide details about the trust, including the settlor, beneficiaries, and assets. Registration is typically required for taxable trusts and those with certain UK tax liabilities.
Our team are experienced in handling a broad range of Trusts, that include but aren’t limited to:
Our expert legal team is experienced in creating and managing bare trusts, ensuring that your assets are secured for years to come.
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Ensure your loved ones are cared for with an Interest in Possession Trust, expertly handled by our trusted solicitors to support your partner and secure inheritance for future generations.
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Culver Law, London
Hamilton House
1 Temple Avenue
London
EC4Y 0HA
0207 846 5029
Culver Law, Cambridge
9 Hills Road
Cambridge
CB2 1GE
01223 653010
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