Advice needed - Life interest trust wills and mortgages

oldstokie

I'd be very grateful for any advice or guidance on the following.

My wife has recent been diagnosed with a life threatening illness, which has led to us reviewing our wills.  We want to ensure our children's interests are protected should the surviving partner meet someone else in the future (both aware of situations where family wealth has been lost in this scenario) and with that in mind we are leaning towards a life interest trust will with a tenants in common restriction on the property title.

We understand the implications should the surviving partner wish to downsize but we're unclear if there are implications when it comes to remortgaging.  We are both in our early 50s and whilst we have life insurance, which will repay most of the mortgage, it is possible the survivor may wish to retain some capital and keep a small mortgage or borrow in the future for any major property repairs.  Does anyone know if this is possible or do these trusts effectively prevent future borrowing?

We have discussed with our solicitor who has suggested there are difficulties but it's not their field of expertise. Appreciate we should probably be seeking specific financial advice but we're currently juggling lengthy daily hospital treatment, helping kids navigate their exams and holding down jobs in the remaining hours which mean time and money are scarce.  Any advice from others who have already navigated this would be very much appreciated.

Thank you.

Keep_pedalling

That is a very interesting question. I see a couple of issues here. Even if the whole mortgage is paid off through the insurance, that insurance does not form part of the estate so can’t be inherited. Does that mean the children only get a 50% share of the equity that was held at the time of death? 

The other question is if the mortgage is not paid off who is responsible  for paying it?

Sorry that is not of much help to you, hopefully someone with better knowledge will be able to help.

MWT

oldstokie said:

... and with that in mind we are leaning towards a life interest trust will with a tenants in common restriction on the property title.

One complication that we see here from time to time is when the surviving partner contemplates equity release in later life and finds it is not an option due to the trust...

Not something high in your thoughts right now I am sure, but just be aware that heading down this path removes that possibility in the future...