Life Interest Trust in a Will - can the Life Tenant end this?

Trusts Discussion
1

I am dealing with a Will where the Life Tenant is the Testatrix’s child (23 years old). The trust contains a property which is now being sold. We have the ability to purchase a new property but there is not sufficient value in the property for the trust to purchase an onward property where the Life Tenant wishes to move to.

The Life Tenant would like to end the trust and have the funds appointed to her so that it does not impact her ability to purchase a new property with the assistance of a mortgage etc. , the Trustees are in agreement with this. However there are a couple of issues:

  1. There is no overriding power to appoint capital to the life tenant
  2. The remaindermen of the trust are the deceased’s “grandchildren” of which there are none (yet or maybe never will be) but failing that a charity.

Are there any options available here?

It appears that the overall intention of the Will was to provide the daughter (the life tenant) with a roof over her head for the rest of her life but that perhaps sufficient consideration was not given to the practicalities and costs of this.

Thanks in advance

Rachel

2

I can’t see how you can make an advance to the life tenant. Your options are probably limited to an interest free loan to the LT or buying alongside them. Both would require an understanding lender. I don’t have much knowledge in that area but I suspect (as you imply) that it would cut down the field of available lenders quite dramatically. A broker may be able to help.

A loan may also require an express power to lend - but that’s another issue!

3

Thanks Andrew - I think buying alongside them may also cause some complications in terms of the LT not being eligible for the lower SDLT rates and being a FTB which again we believe goes against the overall aim of the trust when created by the Testatrix.

Perhaps an interest free loan is an option to consider but as you say, we would still need a sympathetic lender.

However, I have no express power to lend in the Will Trust itself and I only have STEP provisions 2nd edition to go by. Clause 4.7.1 of the STEP provisions would have been helpful but is only applicable if the Will contains an overriding power of appointment of capital, which again I do not have…