Flexible Life Interest Trusts (FLITs)

You have opened the Will expecting a simple sentence: "I leave everything to my wife" or "to my husband". Instead you find pages of trust wording: a "life interest" for the surviving spouse, "trustees", "overriding powers of appointment", a list of "discretionary beneficiaries". The first reaction is often alarm. Has the survivor been cut out? Is the money locked away?

Almost always, the answer is no. A Flexible Life Interest Trust (usually shortened to FLIT) is one of the most widely used structures in professionally drafted Wills for couples, particularly where there are children, a second marriage or concerns about the survivor's later years. The person who died chose it deliberately, to look after their spouse for life while making sure the family's capital ends up where they intended. This factsheet explains what the clause means and what to do about it.

What a FLIT actually is

A trust is an arrangement where one set of people, the trustees (the people who legally hold and manage the assets), look after assets for the benefit of others, the beneficiaries, under rules set out in the trust document (here, the Will itself).

A FLIT has two layers:

1. The life interest. The surviving spouse or civil partner is the life tenant (the person entitled to benefit during their lifetime). They have the right to all the income the trust assets produce (rent, interest, dividends) and, where the family home is in the trust, the right to live in it. Because this right starts immediately on death under a Will, it is known for tax purposes as an immediate post-death interest, or IPDI.
2. The flexibility. Unlike a basic life interest trust, the trustees of a FLIT also hold overriding powers of appointment (powers letting them redirect capital, during the survivor's lifetime or after, to a wider class of beneficiaries, typically children and grandchildren). Trustees can usually also advance capital to the survivor if they need it. A confidential letter of wishes (a non-binding note from the person who died explaining how they would like the powers used) often sits alongside the Will; ask whoever drafted it whether one exists.

That mix (security for the survivor, capital kept for the children) is exactly why the person who died chose it.

Why people set up FLITs

Protecting children's inheritance in blended families. Leaving everything outright to a spouse means the spouse then owns it absolutely and can leave it wherever they choose. In second marriages especially, that can mean children from a first relationship receive nothing. A FLIT lets the survivor benefit for life while the capital is preserved for the children named in the Will.

Guarding against remarriage and "sideways disinheritance". If the survivor remarries, an outright inheritance can drift to a new spouse and their family through a new Will, intestacy (marriage revokes earlier Wills) or merged finances. Trust assets do not belong to the survivor and cannot be redirected this way. See Intestacy: Who Inherits Without a Will for why remarriage is such a pressure point.

Care fee exposure. If the survivor later needs residential care, the local authority assesses the survivor's own assets. Capital held in a Will trust created by the first person to die is not the survivor's property, and councils will usually reflect that, although the income the survivor receives from the trust is counted and the capital position is always a decision the council makes on the facts. Nobody can promise you an outcome, and a FLIT should never be bought for this reason alone. What can fairly be said is that a trust created by someone else's death is a different thing from giving your own assets away during your lifetime, which is the practice we warn about in our Care Fees and Your Home: Myths vs Facts factsheet.

Flexibility. Nobody knows, when a Will is written, what the family will need decades later. The overriding powers let trustees release capital to a child who needs it, hold back from a child mid-divorce or restructure for tax, guided by the letter of wishes.

How a FLIT works for Inheritance Tax

On the first death. Because the survivor's life interest is an IPDI, tax law treats the survivor as if they owned the trust assets. Where the surviving spouse or civil partner is a long-term UK resident, the unlimited spouse exemption applies; if they are not, the exemption is capped at £325,000 unless an election is made, so take advice. Where the exemption applies in full, no Inheritance Tax is normally payable on assets passing into the FLIT, and the deceased's nil rate band (the £325,000 IHT-free allowance, frozen until April 2031) and residence nil rate band (up to £175,000 where a home passes to direct descendants, tapered away for estates over £2 million) are generally unused and can usually be transferred for the second death.

On the second death. The trust fund is added to the survivor's own estate and taxed as one, at 40% above the available allowances (36% where at least 10% of the taxable part of the estate, broadly what is left after debts, exemptions and the nil rate band, passes to charity). With both sets of allowances potentially available, a couple can often pass on up to £1 million free of IHT, depending on circumstances.

One change to plan for. From 6 April 2027, most unused pension funds and death benefits come into the Inheritance Tax net, under Finance Act 2026 and the technical note HMRC published on 11 May 2026. For many couples the pension is the largest asset outside the house, and it has sat outside Inheritance Tax until now. If your plan was built before this change, it is worth revisiting.

The residence nil rate band needs care. It is only available where the home passes to direct descendants outright or on certain qualifying trusts; advice is needed where a trust is involved. If the fund is still sitting in the discretionary layer of the FLIT when the life tenant dies, the allowance is generally lost and cannot be recovered afterwards. The trap can only be defused during the survivor's lifetime, so trustees should take advice well before the second death, not after it.

Using the overriding powers during the survivor's lifetime. If trustees appoint capital away from the life tenant, the law treats that as a gift by the survivor: usually a potentially exempt transfer (a gift that escapes IHT if the survivor lives seven more years) if outright, or an immediately chargeable transfer if onto continuing trusts. These powers should never be exercised until the tax consequences have been worked through with a specialist.

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What executors and trustees need to do now

1. Read the Will properly, and find the letter of wishes. The Will sets out your powers. The letter tells you how the person who died hoped you would use them. Ask the firm that drafted the Will whether one was left with them.
2. Work out what actually goes into the trust. Not everything does. Assets held as joint tenants pass to the survivor automatically, and most pension death benefits are paid at the scheme's discretion. Only what passes under the Will reaches the trust.
3. Value everything at the date of death, and keep the evidence. Those figures become the trust's opening position and you will need them again on the second death.
4. Deal with the Inheritance Tax and the probate application. Where the survivor is a long-term UK resident spouse or civil partner, the spouse exemption normally means no tax on the assets going into the trust. Claim it, and record the unused nil rate band and residence nil rate band so they can be transferred later.
5. Put the assets into the trustees' names. The house needs to go on the Land Registry title in the trustees' names with the right restriction, and investments and accounts need retitling too. Until that is done, the trust exists on paper only.
6. Agree in writing how the survivor will be paid. The life tenant is entitled to the income. Decide whether it is mandated to them directly or paid through a trust account, and confirm it in a letter they can keep.
7. Register the trust with HMRC. A life interest trust for a surviving spouse runs on well past two years, so it will need registering with the Trust Registration Service and the entry keeping up to date. Our Trust Administration factsheet sets out the deadlines, the exclusions and what registration involves.
8. Open a trust file and keep it properly. Minutes of decisions, annual accounts, correspondence with the survivor and with the children. Whoever succeeds you as trustee will need all of it.
9. Diarise the residence nil rate band review now. This is the one that costs families money. If the fund is still sitting in the discretionary layer when the life tenant dies, the allowance is generally lost and cannot be recovered. Book that review years ahead of the second death, not months.

A worked example

Raj and Meera are both in second marriages, each with two children from their first. Raj dies, and £650,000, including his half share of the family home, passes into a FLIT with Meera as life tenant and all four children in the discretionary class. No IHT is payable on Raj's death because of the spouse exemption. Meera lives in the home and receives the income for many years. When she later moves into residential care, the trustees give the council the Will, the trust deed and the accounts. The trust capital is not Meera's property, and on these facts the council assesses only her own capital together with the income she receives from the trust. A different council could look at the same facts and ask more questions. This is an illustration, not a prediction. Before Meera's death, the trustees take advice and arrange matters so that Raj's share passes to his two children on her death, preserving the residence nil rate band, and Meera's own estate passes under her Will to hers. Both sets of children inherit as intended. This is a hypothetical example for illustration only.

Common mistakes

The survivor treating trust assets as their own. Trust capital is not the survivor's money. Mixing it with personal accounts or spending capital without a trustee decision undermines the protection and creates real legal and tax problems.

Never registering the trust. Many family trustees do not know the Trust Registration Service exists. Check, and register if required.

Exercising the overriding powers casually. An appointment of capital away from the life tenant is treated as a gift by the survivor, with a seven-year IHT clock. Ask a STEP-qualified adviser to check the position before any deed is signed.

Leaving the fund in the discretionary layer until the life tenant dies. If the assets are still there at the second death, the residence nil rate band is generally lost and cannot be recovered afterwards. The position must be reviewed during the survivor's lifetime, well before the second death.

Collapsing the trust without understanding why it was created. Appointing everything outright to the survivor is sometimes possible, but it destroys the protections the deceased paid to put in place.

Losing the letter of wishes. It is the trustees' best guide to the deceased's intentions.

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Trust planning should always follow personal advice.

This factsheet is general information for England and Wales, not legal, tax or financial advice. Last reviewed: August 2026.