Interest in Possession trusts

This is a trust in which there is a named beneficiary who has the right to enjoy the income generated from the trust or the right to occupy a property within the trust, rent-free for the remainder of their life or a set period of time.

Strictly speaking, they do not own the assets and cannot decide to whom the asset passes after their death, they only have the right to enjoy the assets for the time frame specified.

Often this comes with conditions such as maintaining the property, keeping it insured, paying the mortgage on the property, not remarrying or allowing another to live in the property with them, but none of these are essential.

They are a useful way to ensure your spouse or civil partner is protected and maintained for life, whilst ensuring that eventually, your assets will pass to your children rather than beneficiaries chosen by your surviving spouse or civil partner (such as their new spouse, or children from a later or earlier relationship for instance).

Varies depending on whether the trust is created by Will or by lifetime transfer and whether the lifetime beneficiary is the spouse of the person creating the trust.

For lifetime created trusts of this type (since 2006) or those created by Will for someone other than a spouse, inheritance tax can be charged when the trust is set up, whenever distributions are made and every 10 years as per discretionary trusts.