What is a Flexible Life Interest Trust (FLIT)?

A Flexible Life Interest Trust is a powerful estate planning tool that provides financial support to a surviving spouse while protecting assets for future generations, typically children or grandchildren.

How does a Flexible Lifetime Interest Trust work?

After the testator’s death, the residue of their estate is placed into the FLIT. The life tenant receives income and may access capital if the trustees allow. Trustees can also distribute or loan capital to other beneficiaries, such as children or grandchildren, depending on their needs. The testator can provide guidance in a Letter of Wishes, outlining how they would like the trust to be used.

When is a Flexible Lifetime Interest Trust used?

A FLIT arises when a beneficiary (usually the surviving spouse is granted a life interest in the estate. This means they are entitled to all income from the trust during their lifetime, and may also receive capital at the discretion of the trustees.

When the life tentant dies, the trust automatically converts into an discretionary trust allowing greater flexibility in how the assets are managed and distributed among the remaining benficiaries.

What are the advantages of a Flexible Lifetime Interest Trust?

Protects assets for children and future generations, even after the death of the surviving spouse.

Avoids assets passing to a new spouse or being lost through divorce or bankruptcy.

No IHT charges during the life tenant’s lifetime (no anniversary or exit charges apply).

Gifting flexibility.

Trustees can make loans to reduce inheritance tax on beneficiaries’ estates.

Adapts over time.

Trustees can convert the trust or distribute assets early if circumstances change.

Why use a Flexible Lifetime Interest Trust?

You can use a FLIT for: Providing for a surviving spouse, protecting children’s inheritance, managing blended family situations, maintaining control and flexibility for trustees, and long-term planning for inheritance tax efficiency.

Disclaimer: Your Estate Planning Consultant will provide advice on the inheritance tax consequences of the use of a FLIT within your estate planning portfolio.