Recorded Webinar: Tax Consequences of Creating and Maintaining Life Interests in the Estate Plan

The increasing numbers of blended families have also led to increasing interest in life interests as a way to provide security for a surviving spouse while ensuring that assets eventually go to the children of the testator. This session considers the tax implications that may arise as a result of life interests, including the following scenarios:

• Susan dies and her will provides that her second husband Tom will have a life tenancy in the house that they lived in. Once he dies, the house will go to her two children from her first marriage, Alex and Sam.

  • Scenario 1: Tom lives in the home until he dies, and Alex and Sam receive the house in equal shares.

  • Scenario 2: Alex and Sam disclaim their remainder interest in the house.

  • Scenario 3: Tom, Alex and Sam enter into a deed of arrangement agreeing to vary the will so that the house is sold, and he receives a proportion of the proceeds so that he can downsize into an apartment.

  • Scenario 4: The house is rental property in which Tom has a 50% direct interest in the house, and a 50% life interest through Susan’s will. Alex and Tom disclaim their remainder interest in the house, and Tom sells the house.

• What tax consequences arise as a result of the creation of the life interest?

• What CGT events are triggered for Tom, Alex and Sam as a result of the various proposed transactions?

• Identifying market value of the life and remainderman interests

• What stamp duty issues need to be considered?