I would be grateful for advice. Can the Trustees of a FLIT cap the income of a life tenant (being the spouse)? Can they apply the income for the benefit of another beneficiary without obtaining the permission of the spouse? Thank you.
You would need specific power in the trust instrument to redirect income away from the life tenant.
Usually, with a FLIT, the terms of the trust provide for the income only to be paid to the life tenant (during their lifetime), with the trustees having power to appoint all or part of the underlying capital elsewhere, thereby depriving the life tenant of the income from that capital. Provided the terms of the trust are sufficiently flexible, the trustees may be able to terminate the life tenant’s interest in a specified part of the trust fund and appoint that upon life interest trusts for the benefit of another beneficiary.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
Obviously subject to the precise terms of your trust, as Paul says, but could you vary the investment balance in favour of capital growth at the expense of income to cap this?
If so, do the trust provisions permit an advancement of capital to your preferred beneficiary?
Just a thought, perhaps outside the box?