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
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
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!
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
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
Josie - just to be clear, is the LT wanting to:
I will just sound a warning to avoid a long diatribe. Please don’t muck about with settle property surrenders, disclaimers, or assignments, for value or by gift, unless you have a solid grasp of the law of trusts and real and personal property, plus the complex nightmarish tax treatment and anti-avoidance legislation that attend on these operations.
Jack Harper
Foster and Cranfield have been in the business of selling interests under settlements etc. for a long time, so probably seek their assistance for valuation.