

What is a Life Interest Trust?
A life interest trust in Scotland, also known as a liferent trust, is a legal arrangement where assets are held in trust for the benefit of a person for their lifetime (known as the liferenter) and then pass to another person (the fiar) after the liferenter’s death.
The liferenter has the right to use the assets or income from the trust during their life, without owning them outright. Upon their death, the assets pass directly to the fiar.
A Life Interest Trust is a good financial vehicle that can be used to alleviate the initial costs of home care. It is not a simple structure to set up and will need the involvement of a solicitor who is experienced in Wills and Estate Management.
In a Scottish life interest trust, the primary parties involved are the settlor, trustees, life tenant, and remaindermen. The settlor establishes the trust and supplies its assets. Trustees are tasked with managing these assets in line with the trust deed. The life tenant, also known as the liferenter in Scotland, has the right to use the assets and receive income from them during their lifetime. Upon their passing, the remaindermen, referred to as fiars in Scotland, inherit the remaining assets. Here’s a more detailed explanation:
- Settlor: The individual who creates the trust and contributes the assets.
- Trustees: People or entities responsible for administering the trust assets per the trust’s terms.
- Life Tenant (Liferenter): The beneficiary entitled to use the trust assets and receive income during their life.
- Remaindermen (Fiar): Those who receive the trust’s assets after the life tenant’s death.
What is a Deferred Payment Agreement (DPA)?
Although you are unable to secure a mortgage against future care home fees, you can take advantage of a deferred payment agreement in Scotland.
A local council will pay for your care costs and will retrieve these once your property is sold or in the event of your passing. You will need to take into consideration your spouse or children in this decision, as it will affect any future inheritance for those family members.
Age UK have put together some very useful information on Deferred Payment Agreements.


Combining a Life Interest Trust and a DPA
Although this is a more complicated process, it can help you to secure funds for your family when you pass away. This is a type of financing and succession planning tool that will need to be carefully thought out and will require the assistance of a legal professional.
In Scotland, there is a rule that applies to the term “Deprivation of Capital or Notional Capital.”
The council might assess that you have deliberately reduced your assets to lower your responsibility for paying residential care costs. While there may be multiple reasons for disposing of an asset, if the council believes that avoiding care home fees was a significant motive, they may determine that you’ve intentionally deprived yourself of capital. Consequently, they will calculate your care home fees as if you still owned the asset.
There is no time restriction on when the asset transfer occurred. If you disagree with the council’s decision, you can file a complaint through their complaint process.
Deprivation of capital can take various forms, including:
- Making a lump-sum payment to a relative or friend
- Incurring significant expenses, such as an expensive holiday
- Transferring property title deeds to someone else
- Placing money in a non-revocable trust
- Leading an extravagant lifestyle beyond your usual means
To learn more about this subject in Scotland, it is worth reading the guide from Care Information Scotland.
If you feel that 1st Focus Homecare is a company you can trust, please contact our office on 0131 510 7878, where we can discuss your care needs. If we can help you or your loved one, we can arrange to meet you in person at your home to assess your care needs. Once an agreement is in place with you privately or via the local council, we will build you a care and support plan and agree on a start date.
Conclusion
Please note that information on this page should not be taken as legal, financial or funding advice. Any questions that you have regarding life interest trusts or deferred payment agreements should be discussed with a competent legal professional.
1st Focus Homecare is a leading provider of in-home care services in the Edinburgh region with huge experience in providing both bespoke day care and 24-hour live-in care services, especially for people who are suffering from Dementia and other conditions.
If you have any questions about care services in Edinburgh, please feel free to contact the team here at Tel No. 0131-510-7878.
We are always happy to answer questions and pass on care advice.
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