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How to Protect Your Family Home with Proper Estate Planning

Family homes are often a special, sacred place. We understand that sometimes people want to keep their family homes within the family. A comprehensive Estate Plan can ensure that your family home stays that way - even following your death.

A family home is more than just the place you go after a long day at work. For most people, a family home is somewhere memories are made; it’s where your kids took their first steps, where the whole family went to celebrate Nan’s 90th birthday, where you’ve been putting up the same Christmas Tree and homemade decorations for the past 20 years. 

We understand how important it is to cherish and protect the memories we make – along with the places we make these memories, however through lack of proper estate planning, the very place these memories are made can be exposed to potential asset risk and tax implications upon the death of a loved one.

Many people don’t realise it, but by implementing a comprehensive estate plan, you can ensure your family home stays protected, particularly from asset risk and future relationships.  

Protecting Your Home Through a Right to Occupy 

For business owners and directors of companies, it’s common practice for the family home to be owned in the name of the spouse who has less exposure to outside liabilities (creditors, litigation etc) because they are not a director.

Through a comprehensive will, you can include clauses that protect your family home and enable your surviving partner/spouse to maintain control of the property for themselves and your children without having to hold the property in their personal name. This is known as a Right to Occupy. A Right to Occupy essentially gives someone the right to live in the property, without the property having to be taken in the personal name of the beneficiary. The beneficiary’s entitlement is normally subject to certain conditions such as, maintaining the property and paying property expenses.

What are the Benefits of a Right to Occupy? 

Asset Protection with Flexibility 

A Right to Occupy allows the surviving spouse to maintain control of the property without it having to be passed into their personal name (key for business owners!), which can come with increased exposure to outside risk.  A common inclusion in a Right to Occupy is to grant the surviving spouse the ability to sell the current family home, potentially to downsize or purchase something more suitable, and still enjoy the asset protection benefits of a Right to Occupy for so long as the sale proceeds are used to purchase another principal residence.

A Right to Occupy can also be granted to the legal guardians of your children should you both pass, allowing your family the benefit of being able to remain within your family home through an often stressful time, with your children remaining entitled to the property as part of your estate. 

Tax Benefits

Another key benefit of a Right to Occupy is that it allows the surviving spouse to maintain the full capital gains tax main residence exemption, which applies from the date of death through to when a property is sold, as opposed to the normal inheritance rules which require a beneficiary who inherits the deceased’s property to sell it within 2 years of date of death in order to obtain a full tax exemption.

Conditions of a Right to Occupy 

Despite the many benefits that come along with a Right to Occupy, you should also take note of a few conditions before considering if it is right for you and your family: 

  • Beneficiaries cannot lease the property 
  • Beneficiaries are unable to make a profit from the property 
  • When the Right to Occupy ends: 

                   - the property will be transferred to established trusts outlined within the deceased’s will or 

                    - the property will be sold with the remaining net proceeds paid out to the remaining beneficiaries outlined in the will 

What are the Differences Between a Right to Occupy and a Life Interest? 

A Life Interest is an alternative approach to a Right to Occupy, whereby an individual is appointed by the will-maker and given the ability to live in the family home for the duration of their lifetime. While Life Interest may sound quite similar to a Right to Occupy, there are some key differences that you should take note of: 

  • Through a Life Interest, an occupant is able to lease the property out and generate a form of income through rental repayments – whereas a Right to Occupy doesn’t allow occupants to rent the property out, or earn an income from it
  • If the occupant living in the property under a Life Interest agreement was declared bankrupt, they may be forced out of the property and expected to rent it out in order to pay the creditors 
  • Under a Right to Occupy, the occupant cannot be forced out of the family home under any circumstances

Here at BlueRock, we take a multidisciplinary approach to estate planning. If you’re interested in hearing more about how you can protect your family home through a will or estate plan, get in touch with our experienced Melbourne-based financial advisors and estate planning lawyers. 

This article is intended as general information only and should not be considered as advice on any matter and should not be relied upon as such. The information in this article has been prepared without taking into account any individual objectives, financial situation or needs. You should therefore consider the appropriateness of the information in regards to these factors before acting, or seek advice before making any financial decisions.

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The origin of the BlueRock name is a mash-up of the founders two favourite things.
Through a mutual love of the Carlton football team and Dwayne 'The Rock' Johnson, a firm was born!