Back to Basics – Flexible Life Interest Trust (FLIT)

22nd October 2020Manisha Chauhan22

Flexible Life Interest Trusts (FLITs) are sometimes described as “the ideal modern family trust.” The reason for this is because it allows a person to benefit immediately on the death of the testator while at the same time protecting the assets for others i.e. the children.

A FLIT arises when a beneficiary, normally a surviving spouse, is given a life interest in the assets contained in the estate. The trustees have the power to pay income and often capital to the life tenant. While the life tenant is alive, the trust is treated as an interest in possession trust. However, on the death of the life tenant, the trust automatically turns into a discretionary trust and is therefore treated as a relevant property trust.

These types of trusts are therefore very flexible and ideal where the testator wants to provide for their surviving spouse during their lifetime whilst offering ongoing protection of trust assets for the other beneficiaries, up to a period of 125 years.


How does a FLIT work?

On the death of the testator, the residue of the estate is put into trust. The life tenant will be entitled to receive all income of the trust during their lifetime and will be treated as the main beneficiary.  Trustees will still have discretion with regards to capital which can be given absolutely or loaned to the life tenant.

It is important to add that the flexibility of giving or lending capital does not extend to just the life tenant but the other beneficiaries also. For example, the trustees could exercise their discretion to use some of the trust funds to pay off a child’s mortgage if they request this.

As we have illustrated, given the flexibility with this type of trust, where the testator would like the trust funds to be distributed in a certain way or have concerns that they would like their trustees to be aware of, this should be set out in a letter of wishes.


Advantages of a FLIT
  • Ideal for protecting the assets of the estate on first death but also on second death as the trust turns into a discretionary trust and can therefore has the ability to benefit future generations.
  • Protects the estate in the event the surviving spouse goes into care or bankrupt as the assets are owned by the trust and not the surviving spouse. The trust also protects the assets from passing to a new spouse by either being gifted to them, as part of divorce proceedings or being left to the new spouse by Will or intestacy.
  • The assets are protected for the benefit of the other beneficiaries from third party claims similar to that mentioned above as the trust turns into a discretionary trust and therefore the assets still belong to the trust and not the individual beneficiaries.
  • Where IHT is an issue for some beneficiaries, the trustees have the ability to loan the money to the beneficiary so it does not have any effect on the size of their own estate.
  • No anniversary or exit charges apply during the lifetime of the life tenant and therefore the life tenant can make gifts during their lifetime to reduce IHT payable.
  • The FLIT allows for the trustees to convert some or all of the trust fund into another type of trust. So if IHT laws change in the future, the trustees can change how the fund is held. The trustees could choose to end the trust early and distribute the assets to the beneficiaries if they wish to.


Disadvantages of a FLIT

The main disadvantage of a FLIT is the future IHT liability that this creates since assets in the FLIT would be treated as part of the life tenant’s estate for IHT purposes.


What happens when the life tenant dies?

On the death of the life tenant, the trust will end and no longer qualify as an Immediate Post Death Interest trust. Instead, it will automatically become a discretionary trust and be treated as a relevant property trust, therefore anniversary and exit charges may apply.


How is a FLIT taxed?

Inheritance Tax

For inheritance tax (IHT) purposes, the life tenant of the trust is treated as inheriting the trust assets on the death of the testator.

If the life tenant is the deceased’s surviving spouse or civil partner, the spousal exemption will apply and there will be no IHT due when the assets pass to the FLIT. This means the NRB will not be used and can be transferred to the surviving spouse so it can be used on second death.

During the life of the life tenant, no anniversary and exit charges will apply.

Whilst the life tenant is alive, the trustees and life tenant may make some gifts from the trust to other beneficiaries to mitigate IHT. It is important to add that these gifts will be considered as PETS and therefore the 7 year rule will apply for it to not form part of the life tenant’s estate for IHT purposes.

On the death of the life tenant, the trust becomes a discretionary trust and is taxed with reference to the relevant property regime which means anniversary and exit charges may apply.

Availability of RNRB

Where a main residence is left to a FLIT, the RNRB will not be available as on second death, the assets pass to a discretionary trust and not to direct descendants absolutely.

Manisha Chauhan

Manisha joined the Society’s Technical Advice Team in July 2019 having previously worked as an Employment Solicitor in Warwickshire before relocating to Lincolnshire. Manisha provides advice on technical queries for Society Members and ongoing support on our professional drafting software, Sure Will Writer.


  • Sian

    23rd October 2020 at 5:50 pm

    The precedent I use ends the flexible life interest trust on second death and the trust property, which may, and likely will, include a main residende is distributed to the chosen beneficiaries i.e. the children usually. My understanding is that the RNRB would be available (provided all the other criteria are satisfied) in those circumstances.
    Am I correct?


    • Manisha Chauhan

      28th October 2020 at 9:14 am

      Hi Sian,

      Where a main residence is left to a FLIT, I’m afraid the RNRB will not be available as on second death, the assets pass to a discretionary trust and not to direct descendants absolutely. Whilst the life tenant of a FLIT is alive, the property is treated as an interest in possession trust however once the life tenant has died the property is treated as a relevant property trust. When property is left to certain trusts this will not affect the application of the RNRB but I am afraid this does not include discretionary trusts.

      If the client’s main residence forms part of a discretionary trust on the client’s death by their will, there is one method that can be used to claim RNRB. Under S144 Inheritance Tax Act 1984, if assets are appointed out of a discretionary trust to a beneficiary within two years of death, for IHT purposes it is seen as if the will had gifted the assets to the beneficiary and not to the trust. However, it would be for the trustees to act efficiently and there is therefore no guarantee this will be done.

      If a client wishes to ensure RNRB will apply, we would advise that the main residence be placed into a separate PPT.


      • Sian

        21st November 2020 at 9:28 pm

        Hi Manisha.
        It is possible to limit the overriding provisions so that they can only used during the lifetime of the survivor ensuring the property passes outright on second death.
        I attended a Lesley King CPD event on Thursday which reconfirms this. Careful drafting required.


        • Siobhan Smith

          13th April 2021 at 11:45 am

          Hi Sian

          Apologies, you’re absolutely correct. Provided the discretionary powers don’t apply to the property on second death so that it is treated as having passed from the estate of the second to die to their direct descendants the RNRB would be available.


  • James hughson

    19th August 2021 at 7:28 pm

    Does a flit protect you from care costs whilst you are alive? Or bankruptcy?


    • Manisha Chauhan

      23rd August 2021 at 9:45 am

      Hi James,

      A FLIT is a will based trust so would be set up on death.

      However a FLIT does offers protection for the estate. In the event of the surviving spouse going into care or going bankrupt, the trust fund is protected from such claims as it is not owned by the spouse. It is similarly protected from passing to a new spouse by either being gifted to them, by being involved in divorce proceedings or by being left to the new spouse by Will or Intestacy.


      • Graeme

        31st January 2024 at 5:01 pm

        Hi Manisha
        Would the protection after first death only be to half the house and the persons assets that have gone into trust? The other half of the house could be lost to sideways disinheritance and potential crare fees of the survivor?


        • Manisha Chauhan

          5th February 2024 at 4:11 pm

          Hi Graeme, yes this is correct although on second death the share of the home would pass to whomever is due to inherit it. Sideways disinheritance is only really an issue where the home passes to the spouse or partner


  • Andrea Simmons

    3rd February 2022 at 7:20 pm

    how about taxation is it subject to chargeable lifetime tax on putting the house into the trust and periodic charges ?


    • Siobhan Rattigan-Smith

      4th February 2022 at 1:07 pm

      Hi Andrea, The FLIT in this context is a will based trust, so there is no entry charge. In the majority of cases these trusts are used to benefit a surviving spouse or civil partner so on first death when the trust is set up there is no charge to inheritance tax on the assets entering the trust.


  • Jason Coleman

    2nd March 2022 at 8:03 am

    What if the client wishes to name specific beneficiaries as the final beneficiaries (not just descendants). I have a client who wishes to place a FLIT in his Will, but wishes to exclude some of his children, also can percentages apply to the end beneficiaries?


    • Siobhan Rattigan-Smith

      8th March 2022 at 9:10 am

      Hi Jason, The default clause of the FLIT can name individuals or groups and state percentage shares in which they will inherit in, but this will be what is received when the main trusts end.


  • John Rawlings

    24th May 2022 at 1:49 pm

    If the three trustees of a FLIT are the surviving spouse, and the two sons of the testator, and the surviving spouse is the life tenant, and the sons the beneficiaries, what protection does the life tenant have against capital transfers to the beneficiaries during her lifetime?


    • Siobhan Rattigan-Smith

      24th May 2022 at 7:31 pm

      Hi John, as a trustee the surviving spouse would need to consent to any capital transfers or other use of the trust funds.


  • Roy Heath

    12th October 2022 at 1:23 pm

    Can Assets be added to a Flexible Trust thus reducing Inheritance Tax


    • Manisha Chauhan

      10th January 2023 at 12:27 pm

      Hi Roy, yes they can be.



    8th November 2022 at 10:25 am

    Hi Siobhan
    I have an interesting case which I am torn between a NRB DT with IOU and a newer style FLIT – the main asset being the family home worth c£800k to £850k and no intention to downsize at all. The clients have around £250k in savings and so the estate is around £1.1m with 8% being gifted to charities. Clients in their early 80’s.
    The property will be held as TIC.
    The female client V is not in great health and lets assume she passes first, the FLIT would transfer her assets £550k to D. No IHT as inter-spouse exemption, on 2nd death estate to be distributed 92% to family and 8% to charity. No use of NRB or RNRB on V’s death.
    On D’s death assets in above split 92% family and 8% charity.
    D’s executors would claim the twice both the NRB and RNRB i.e. £1m.
    If everything else remains equal IHT is minimal but as an IFA I am also dealing with IHT.
    The question centres on D not have a grossing up of the property as a BIK as whilst he has enjoyed the use of it during his lifetime this is considered exempt due to inter-spouse exemption and so whilst he has to show the use / value when his probate return is completed post his death he can use V’s allowances?


    • Manisha Chauhan

      10th January 2023 at 1:33 pm

      Hi David, please can you email the team and we will try to assist with your query


  • Nadine Burton

    1st February 2023 at 7:38 pm

    My parents have 2 properties I parent owns one, one parent owns the other, one they live in , one that is currently empty which is divided into 2 flats which the grandchildren may move into after university, on first death one house goes into a FLIT for the grandchildren, they also currently have savings of £400,000. When parent 2 passes is IHT due on the whole estate and how would probate value the FLIT house at time of second death? One parent is 75 the other is 77.


    • Manisha Chauhan

      27th February 2023 at 4:37 pm

      Hi Nadine,

      With regards to the FLIT, once the life tenant dies the trust becomes an ordinary discretionary trust. On the life tenant’s death the whole fund would be revalued and the value included within the life tenant’s estate for IHT purposes. With regards to probate, I am afraid this is not something we can advise on.


  • San

    19th May 2023 at 5:39 am

    Above case scenario given are where the life interest tentent is the remaining spouse. Can you assist in this case scenario – However would the RNB & RNRB apply if property & assets are put in a FLIT where property is owned by single remaining parent (outright) who wishs to leave for the benefit of only child and subsequent future grandchildren? And would RNRB therefore also apply on death of only child as next in line are grandchildren (eg would it still remain as a FLIT and wouldn’t revert to a discretionary trust)?. Deceased 1st parent’s NRB available also. Also would probate, IHT still apply on death of single parent? If so how would These be paid? Much appreciated


    • Manisha Chauhan

      2nd June 2023 at 1:00 pm

      Hi San, I am afraid we are unable to provide advice on this matter as it depends on how the Will was drafted. We would therefore advise you seek advice from a probate practitioner.


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