Downsizing with a Life Interest Will

Moneymanger1

I will be seeing a solicitor to draw up wills but I am trying to understand the process before making an appointment.

A life interest  will is proposed to protect 1/2 of the family home for the benefit of children from a first marriage. Can anyone advise what happens if the survivor wishes to then downsize.

If for example the current property is valued at £350K at date of first death, and rises to say £400K at the future date of downsizing. Assuming the surviving spouse is looking to purchase for say £300K, therefore releasing equity of £100K for the survivor to live on.
Can the trustees allow the downsizing purchase? Would they need to register a £200K charge against the new property, to protect the children's inheritance. This wouldn't however take account of future property price changes (either positive or negative) between the date of downsizing and ultimate death of the surviving spouse

Is this generally what happens in this scenario or is there a better / fairer option between the parties

Keep_pedalling

Yes that is allowable. The terms of the trust could say whether the released equity is to remain in the trust or be distributed to the remaindermen. 

Newly_retired

I am the survivor of a second marriage, continuing to reside in the property, but may consider downsizing.

I think you will find that first you need to be tenants-in-common, so that you can each leave your half to your own children. Your wills should clarify the terms and conditions, but on first death, a new Trust will need to be set up and registered with HMRC and the Land Registry entry changed. Your solicitor can advise on all this. 

On second death, the Trustees, who won’t necessarily be your own executors, will need to act on behalf of the beneficiaries of the Trust, together with your executors, to deal with the property.
Meanwhile, if you have opted to downsize, again it depends on the terms of the original will, but in your position I can use the full equity in this property to purchase another property.  I understand the Trust would need to be amended and 50% of the equity of the new property would go forward in Trust for the ultimate beneficiaries at my death, not as you suggest a charge put on a precise sum representing 50% of the value of the first property. If I added more of my own money to the purchase at that time, then this could alter the %. If I bought a cheaper property then the surplus cash would be spilt 50:50.

This is my understanding. Others will be along to express this in better legal terms. Your solicitor will determine what you wish to achieve and help you to do that.