Flexible Life Interest Trusts Explained: Protecting Family Wealth with Flexibility 

When writing a will, many people face a familiar dilemma: how to provide security for a spouse or partner without losing control over what happens to the family wealth later. 

That’s where the Flexible Life Interest Trust (FLIT) comes in – a trust structure designed to combine the stability of a traditional life interest trust with the adaptability of a discretionary trust. It’s become one of the most effective estate planning tools for families who want both protection and flexibility. 

1. What Is a Flexible Life Interest Trust?

A FLIT is a trust created within your will that allows you to: 

• Protect assets for your surviving spouse or civil partner, and 

• Retain flexibility for how those assets are used for future generations. 

It achieves this by blending two familiar models: 

• A life interest trust, where one person (the life tenant) receives the income during their lifetime; and 

• A discretionary trust, where trustees decide how and when capital is distributed among beneficiaries. 

So, during the life tenant’s lifetime, they have the right to the income (for example, rent, interest, or dividends). But the trustees hold discretionary power to advance or lend capital either to the life tenant or to other beneficiaries – typically children or grandchildren. 

After the life tenant’s death, the trust converts fully to a discretionary trust, giving trustees complete control over which beneficiaries receive capital, when, and in what proportions. 

 

2. Why Use a FLIT Instead of a Standard Trust?

Each traditional trust type has strengths and weaknesses: 

Type of Trust	Pros	Cons
Life Interest Trust	Guarantees income for the life tenant	Rigid: capital usually passes automatically to fixed beneficiaries after death
Discretionary Trust	Maximum flexibility for future decisions	No guaranteed income for any beneficiary
Flexible Life Interest Trust (FLIT)	Provides both – stable income and discretionary capital flexibility	More complex to administer; requires experienced trustees

A FLIT bridges the gap – offering structure for today, and flexibility for tomorrow. 

 

3. How It Works in Practice

Let’s take an example. 

Jane’s Will Example
Jane leaves her estate in a FLIT for her husband, Tom, with their two children as discretionary beneficiaries. 

During Tom’s lifetime, he receives all rental income and dividends from the estate investments. The trustees can, if needed, advance capital – perhaps to fund home improvements or medical care. 

When Tom dies, the trust automatically becomes discretionary. The trustees can then decide how to distribute the remaining capital between the children (or even grandchildren if appropriate). 

This arrangement ensures Tom is financially secure but also that the capital ultimately stays within the family – protected from remarriage, creditors, or future disputes. 

 

4. Asset Protection Advantages

A key attraction of a FLIT is protection from claims and mismanagement: 

• For the surviving spouse: They have no automatic right to the capital, so it’s shielded from potential creditors, care-fee assessments, or claims by future partners. 

• For the next generation: When the trust becomes discretionary, no beneficiary has an absolute right. That means the assets can be protected if a child later divorces, faces bankruptcy, or has personal difficulties. 

• For complex families: The structure allows trustees to delay or stagger distributions, providing ongoing protection and flexibility. 

In other words, a FLIT keeps the family wealth in the family – not subject to chance, emotion, or outside claims. 

 

5. Flexibility for Changing Family Circumstances

Family life rarely follows a straight line. Children’s needs evolve, new partners enter the picture, and health or financial circumstances shift. 

A FLIT gives trustees the ability to adapt over time. For example: 

• Making small capital advances to children to help with education or a house purchase. 

• Lending money to the life tenant (repayable from their estate on death). 

• Adding future descendants as beneficiaries if family circumstances change. 

Each decision can reflect the current situation – not assumptions made decades earlier when the will was written. 

 

6. Inheritance Tax (IHT) Benefits

During the Life Tenant’s Lifetime 

If the life tenant is a spouse or civil partner, the initial transfer into the FLIT qualifies for spouse exemption from IHT. 

• The trust assets are treated as part of the spouse’s estate for IHT purposes, but no tax is due on creation. 

• There are no ten-year (periodic) or exit charges while the life tenant holds their interest. 

After the Life Tenant’s Death 

The trust becomes fully discretionary and is then subject to normal discretionary trust IHT rules: 

• 10-yearly periodic charges (up to 6% of the value above the nil rate band). 

• Exit charges when assets are distributed. 

However, capital retained in trust is kept outside any one beneficiary’s estate – potentially saving IHT in future generations. 

Planning Tip: 

If the estate includes a property qualifying for the Residence Nil Rate Band (RNRB), the will needs careful drafting to ensure that part of the trust can pass to lineal descendants to preserve that relief. 

 

7. Drawbacks and Pitfalls to Watch

FLITs are powerful but not perfect. Common challenges include: 

1. Limited access for the life tenant – They can’t demand capital, only income. If they expected full access to the estate, this can cause friction. 

1. Tax complexity – After the life tenant’s death, the ongoing discretionary trust must report to HMRC and may face periodic or exit charges. 

1. Potential RNRB restrictions – The trust structure may prevent full use of residence-based IHT allowances if not drafted carefully. 

1. Unsuitable for unmarried couples – The spousal exemption doesn’t apply, so IHT can arise immediately. 

Mitigation often comes from: 

• Appointing the life tenant as one of several trustees (for involvement but not control). 

• Including a clear Letter of Wishes explaining your intentions. 

• Taking specialist tax and legal advice before the will is signed. 

 

8. Choosing and Guiding Your Trustees

Trustees sit at the heart of a FLIT. They balance the interests of the surviving spouse and future generations – and that requires both judgment and diplomacy. 

Consider: 

• A mix of professional and family trustees for both expertise and understanding. 

• A clear Letter of Wishes outlining your guidance – e.g., “support my spouse first, but preserve capital for our children.” 

• Authority to add future beneficiaries (for example, grandchildren or stepchildren). 

Good trusteeship can make or break the effectiveness of a FLIT. 

 

9. When a FLIT Works Best

A Flexible Life Interest Trust is particularly suitable if you: 

• Want to protect assets for a surviving spouse while preserving them for children. 

• Have a blended or complex family structure. 

• Wish to guard against future remarriage or financial risk. 

• Value flexibility and ongoing control through trusted advisers. 

It’s less suitable if: 

• You and your partner are unmarried. 

• The estate is modest and ongoing administration costs would outweigh the benefits. 

 

10. The Bottom Line

A Flexible Life Interest Trust offers the best of both worlds:
✅ Income security for your spouse or partner.
✅ Long-term protection for your family’s capital.
✅ Flexibility to adapt to life’s changes. 

But it’s not a “set and forget” tool. Drafting, trustee selection, and ongoing management require careful attention – ideally with input from your accountant and solicitor working together. 

 

Need Help Structuring or Administering a FLIT? 

At CCM | Carter Collins & Myer, we work alongside solicitors and estate planners to help families structure, manage, and account for their trusts effectively – ensuring compliance, clarity, and peace of mind. 

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