As the name suggests, this is the most flexible variety of trust we can include in your Will. This trust combines many of the benefits of the PPT with those of the discretionary trust.
It offers great protection for your spouse and your children, and even generations going forward as it can last for up to 125 years. That’s 125 years that your assets can potentially be protected for, for the benefit of your loved ones and their descendants.
The FLIT can be used over the whole of your estate as, like the discretionary trust, it can take any assets. This can include your family home, your money, investments, business interests, and even rental properties.
Once you pass away control of your assets is handed over to your Trustees, so it’s important to choose people who you trust to manage your estate. At the beginning and for as long as your spouse is alive the trust is treated as a ‘life interest’. This means that your spouse is entitled to live in any property owned by the trust, so it offers the same protection over your family home as the PPT. It also means that your spouse is entitled to be paid all of the income that the trust makes. This may be income from any rental properties or investments, and depending on your estate it can be substantial.
The Trustees can also choose to use the capital of the trust fund to benefit your spouse. This can be by paying sums of money to them directly, or using it for their benefit or to purchase things for them. The Trustees have total control over whether they do this, and when and how.
The FLIT doesn’t end once your spouse passes away though. It carries on as a discretionary trust for the other beneficiaries you’ve named, probably your children and even other descendants like grandchildren and so on. At this point the Trustees will have total control over how they manage the trust, so they will make all the decisions about which of your children to benefit at any given time and how to do it.
The FLIT protects your estate for your spouse for the rest of their life, and then carries on protecting your estate for your descendants going forward. While flexibily providing for your family your estate can be kept safe from:
The other benefits are that you can make sure that your family are provided for in the way that best suits their needs. As these needs change, so too can your Trustees adapt how they manage the trust to best support them.
The Trustees have a lot of options available to them when deciding how best to use the fund too. This is another big part of the trust’s flexilbity. They can decide to gift capital to beneficiaries, but they can also decide to make loans from the trust as this might be better planning for a beneficiary who is already quite well off and worried about their own tax liability.
The Trustees can also purchase property for the beneficiaries to use, either to live in or as an investment.
As well as day to day maintenance, it can also be used to provide more “fun” things for the beneficiaries if that’s what you want. Maybe that skiing trip they always wanted?
There are also various Inheritance Tax benefits of the FLIT which we can advise on once we know more about your own finances and circumstances.
While your spouse is alive and has a life interest in the fund the Trustee’s don’t have as much discretion. While they can make decisions about what to do with the capital of the trust, all of the income has to be paid to your spouse. So during this time there isn’t much you need to think about in terms of what kinds of decisions you want the Trustees to make. If you’re like most people, you’ll just want them to do what is best to support your spouse.
Once your spouse dies and the trust becomes a discretonary trust the Trustees have total discretion and will make all decisions about managing the trust. But remember, they have to use the fund for the vulnerable person’s benefit. We recommend you give your Trustees some guidance on how you want them to manage the trust. This can be done in the form of a ‘Letter of Wishes’, which we can advise on and produce for you. The Trustees should try to follow this letter as closely as they can whenever they are making decisions about how to use the trust.
You can update these wishes at any time without needing to rewrite your will, so don’t worry if you change your mind.