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A life interest ends when the life tenant dies. An interest in possession trust is the most common example of a life interest trust. In a typical interest in possession trust, the life tenant receives all the income from the trust for the rest of his or her life. On the life tenant's death, the trust comes to an end, and the capital of the ...
For Federal income tax purposes in the United States, there are several kinds of trusts: grantor trusts whose tax consequences flow directly to the settlor's Form 1040 (U.S. Individual Income Tax Return) and state return, simple trusts in which all the income created must be distributed to one or more beneficiaries and is therefore taxed to the ...
Such a life interest trust is the most common example of an interest in possession trust. In the United Kingdom, the 10-yearly inheritance tax charge may be payable on assets transferred into this type of trust on or after 22 March 2006. [2] In the example of a life interest trust, the interest in possession ends when the income beneficiary dies.
Life Interest trust the income from property transferred is paid to one person, "the life tenant" (e.g. a widow/er), during their lifetime and thereafter is transferred to another person (who may take absolutely or a second life interest according to the terms of the trust, in the second case a third beneficiary would come into play).
The term "incentive trust" is sometimes used to distinguish trusts that provide fixed conditions for access to trust funds from discretionary trusts that leave such decisions up to the trustee. Inter vivos trust (or 'living trust'): A settlor who is living at the time the trust is established creates an inter vivos trust.
Where the discretionary trust is a testamentary trust, it is common for the settlor (or testator) to leave a letter of wishes for the trustees to guide them as to the settlor's wishes in the exercise of their discretion. Letters of wishes are not legally binding documents. Discretionary trusts can only arise as express trusts.
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Whether such a trust is a spendthrift trust on the U.S. model, a protective trust on the Commonwealth model or another form of discretionary trust, it is more likely to be subject to challenge under the common law doctrine of sham or under specific statutory provisions if any person setting up the trust (or their spouse and their spouse in turn ...