Liferent Trusts in Scotland: What They Are and When to Use Them
We’re often asked about liferent trusts — what they are, when they’re useful, and whether they offer any protection from care fees or inheritance disputes. The reality is that liferent trusts are a well-established tool under Scots Law, particularly helpful in succession planning, but they aren’t a magic fix for every situation.
Here’s what you need to know.
What Is a Liferent Trust?
A liferent trust is a legal arrangement where one person — the liferenter — has the right to use or benefit from an asset (often a house or investments) for the rest of their life, while another person — the fiar — owns the underlying asset and will take full control after the liferenter dies.
Think of it like this:
- The liferenter has the right to live in the house (or receive the income from an investment), but
- The fiar owns the asset and will take full control in due course.
The trust is typically created in your Will, or it can be set up during your lifetime.
When Is a Liferent Trust Useful?
There are a few common reasons to set up a liferent trust:
1. Second Marriages and Blended Families
If you want your spouse or partner to have the right to stay in the house for life — but ultimately want the asset to pass to your children — a liferent trust lets you do both. You protect the surviving partner without disinheriting your children.
2. Protecting Inheritance
It can safeguard your children’s inheritance from being eroded if your spouse remarries or changes their Will after your death.
3. Asset Protection and Care Fee Planning
While no arrangement is guaranteed to avoid care fees, setting up a liferent trust in the right circumstances may help preserve part of your estate — especially when combined with other planning strategies such as removing survivorship clauses. But remember: the local authority can challenge arrangements that look like deliberate deprivation of assets, especially if they’re done late in life.
4. Control and Flexibility
You decide who gets what and when. The trust provides a clear legal framework, helping to reduce disputes and make your intentions binding.
Key Considerations
- Trustees are appointed to manage the trust and make sure the terms are followed. These can be family members, professionals, or both.
- The trust ends when the liferenter dies or otherwise gives up their right.
- The property (or investment) then passes fully to the fiar, who is usually your children or other beneficiaries named in your Will.
- You must take advice to ensure the trust is properly structured — poorly drafted liferent trusts can cause problems later on.
Does a Liferent Trust Help Avoid Care Fees?
That depends.
If a liferent trust is put in place years before care becomes an issue, and it can be shown that it was part of genuine estate planning — rather than an attempt to dodge care fees — it may help preserve your assets. However, if the trust is set up shortly before entering care, there’s a risk it will be treated as deliberate deprivation and simply ignored in the financial assessment.
At Hastings, we’ll always give you a straight answer: a liferent trust can work well — but only when used appropriately and with full legal advice.
In Summary
A liferent trust is a useful and flexible way to protect a family home or investments while ensuring your loved ones are looked after. Whether you’re planning for a second marriage, protecting children from a previous relationship, or thinking ahead about asset protection, it can be a valuable tool.
But it must be done properly.
Advice on Liferent Trusts?
If you’re considering a liferent trust or want to understand if it suits your circumstances, we’d be happy to guide you.
