Agreement of Termination of Life Interest

Trusts Discussion
1

Hello

We have a client who is considering an agreement to terminate a Life Interest Trust. She is the Life Tenant and is looking to ‘pay out’ the remainderman. How would we value the share? How could this agreement be prepared?

Any comments would be greatly appreciated.

Many thanks

2

Provided that the remaindermen’s interest is vested (and not subject to them surviving the life tenant), a simple deed of release might be sufficient.

As to how the “share” might be valued, without detail no reasoned response can safely be given.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals

3

Hi Paul

Thank you for your response!

The interest is not vested. The ‘pay out’ is in relation to the marital home that was placed into a Life Interest Trust upon first death. The home has significantly increased in value over the 10 years since date of death.

Thanks again for your advice!

4

As the remaindermen’s interest is not vested, the situation is not straightforward as they have no entitlement to capital during the life tenant’s lifetime.

It may be that the life tenant could buy the property from the trust, and for the trustees to then use s.32 Trustee Act 1925 to pay the proceeds over to the remaindermen. However, the trustees might want the protection of counsel’s opinion before proceeding down that route.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals

5

Hi Josie

Assuming it is possible under the terms of the trust to end it now:-

Is she looking to keep some of the fund for herself absolutely? Is so I would think you need an actuarial valuation to split the fund between the LT and the remaindermen. https://www.actuaries.org.uk/near-you/actuarial-firms

If she is just ending her interest and passing it all to them then I would have thought the value is what ever the assets are worth at the time of the deed ending the trust (but I am not certain).

If the remaindermens’ interest is not yet vested I think she could assign her life interest to the remaindermen so they get the income even if they can’t get the capital until she dies (assuming they survive).

I suggest you consult a specialist trust solicitor.

Good luck

Sara

Sara Spencer ATII TEP