Does a life interest will trust need to be registered with HMRC?

Rules introduced on 6 October 2020 extend the scope of the trust register, regardless of whether the trust produces taxable income. Trusts created before 6 October 2020 must be registered by 1 September 2022. If they are income producing, they may need to have been registered earlier, depending upon when they started to produce income.

What is a life interest trust?

A life interest trust is a common arrangement in Wills where an individual for eg a surviving spouse is left a right to income or to use or enjoy the benefit of the deceased’s assets or property for their lifetime. This individual is known as the life tenant. Upon the death of the of the life tenant the underlying capital passes to the ultimate beneficiaries under the Will of deceased, known as remaindermen eg surviving children.

Do all life interest trusts require registration?

Life interest trusts are not specifically excluded from registration. Potentially some exclusions could apply, subject to the terms and purpose of the trust. A life interest trust created under Will is excluded from registration for a two year period from the date of death. If the trust is to continue beyond the two year period it will require registration. However, the life interest trust may still have to register if it has a UK tax liability eg it is income producing.

What information is required by the Trust Registration Service?

These trusts must register on the Trust Registration Service and provide information relation to the trustees, beneficiaries and settlor (the deceased whose Will created the trust).

Review your life interest trust

If you have this type of Trust arrangement over your home or assets inherited from your spouse or partner you may wish to speak with your solicitor to explore whether it requires registration and be sure to check any deadlines.

Example

Husband and wife's Will left a life interest in the matrimonial home to each other. Husband had two sons from a previous relationship. Husband died in 2012. The Trustees were the wife and the two sons. The property was transferred into tenants in common in equal shares, with half owned by wife outright and the other half held by trustees. The wife is now downsizing and does not need the trust's half of the proceeds of sale to purchase the new property. The property sold on 30 March 2021. The Trustees plan to invest the proceeds of sale which will produce income for the wife as life tenant which she will need to declare on own tax return. The trustees will need to arrange to register the trust with HMRC by 31 January 2022.