A life interest(sometimes called estate) relates to property which is owned by an individual only through the period of their lifetime. A life interest is restrictive in that it prevents the owner (beneficiary) from selling the property that makes the income before the owner's death. But the interest cannot continue besides the life of the beneficiary.
What means Life interest?
Life interest is a mechanizm which helps to owner (granter) legal transfer of the ownership to another person or life tenant. Typically the owner and the life tenant are the same person, but not constantly. When the died - the goods are transfering to remainderman. For example the owner makes a grant to Mike for life and then to Casey, it means that Mike is life tenant and Casey - reminderman.
Advantage an disadvantage of life interest:
- The biggest benefit of a life interest action is that it can be used to pass property upon the life tenant's death without it being part of the life tenant’s interest. As a result, the property does not have to confirm authenticity. Any interest that the life tenant had in the property ended upon death and did not become a part of the life tenant’s interest.
- One laborious factor to life interest, especially in real estate stuff, is that all parties need to be sensible of the fact that the life tenant and the remainder man both have ownership interests, despite each having different right of possession. It means that the remainderman can also give a legal punishment to tenant if his acting can damage the goods for future owners.
Life of interest and planning horizon
All of the financial or economics analysis of any ongoing concern over a period of time requires detailed knoledge of all the expenses and benefits related with its operations and across its "life of interest". The word interest is inserted here on purpose.
- For example to the decision maker in the Department of Defence in charge of new aircraft acquisition, the life of interest begins at the time he allocates the cost of developing the concept and continues to the estimated time of retirement of such aircraft from service. That's called the end of its economic life and actually thats the start of the life interest to the purchasing company when they purchase.
That means that the life interest depends only on how long we planing to use the system, what actually called planning horizon.
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Author: Valentyna Ilyina