Ready to write or update your will as part of a comprehensive estate plan? Understanding the concept of a "Right to Occupy" can make a huge difference for your family and your assets, especially when it comes to the family home. This guide breaks down what it is, the benefits (including tax advantages) and other options available, like Life Interests . Let's dive in!
What is a Right to Occupy in a Will?
Imagine this: your spouse can continue living in the family home after you're gone, without officially owning it. That's the magic of a Right to Occupy clause in your will. It grants an individual (AKA the Life Tenant) the right to live in the property without inheriting the Title.
Who is a Right to Occupy Suitable For?
- Business owners seeking to protect the family home from potential business liabilities that could become a burden for the surviving spouse.
- Parents with young children to ensure the children can stay in a familiar environment. Their guardian (the Life Tenant) will also have legal rights to live there.
- Blended families. It allows the surviving spouse to continue to live in the home, while preserving the family home for the benefit of the children of the deceased spouse.
5 Benefits of a Right to Occupy in Your Will
If any of these benefits apply to you, a Right to Occupy could be a good option for your will.
- Asset Protection: Protect a property from being used to repay a spouse's business liabilities.
- Flexibility for Spouses: Your spouse can sell the current house and purchase a new one, while still retaining the right to reside in a property owned by the estate. They can downsize, relocate, or choose a more suitable home without losing the security of occupancy.
- Stability for Children: Your children can continue living in a familiar environment even after your passing. A guardian can be appointed to reside in the property with the children if needed.
- Blended Family Protection: A solution for blended families allowing your surviving spouse to retain the right to occupy the property while guaranteeing your children receive their inheritance from the estate after the spouse passes away.
- Tax Advantages: In some cases, the spouse may retain the full capital gains tax exemption on the property they continue to occupy. This can result in significant tax savings when the property is eventually sold.
Key Points to Remember about a Right to Occupy
While the Life Tenant has full rights to live in a property, they won’t own it. This means a surviving spouse cannot sell or transfer ownership of the property, and once the right of occupancy ends, it’ll be gifted to the “remaindermen” (the ultimate beneficiary) listed in the will.
As always, conditions apply! Typically, the Life Tenant must maintain and pay expenses related to the property, however the estate can also meet these expenses if there are sufficient funds and this is specified in the will. Generally, no income generation is permitted under a Right to Occupy, meaning the Life Tenant can't rent it out. If you’re interested in providing this opportunity in your will, consider a Life Interest.
Right to Occupy vs. Life Interest
Both give someone the right to live in your property, but there are key differences. As we’ve established, a Right to Occupy means no ownership rights and no income generation.
Under a Life Interest however, ownership-like rights are granted, including potential income generation from renting out the property. But, it’s important to note that the property still can't be sold or transferred by the Life Tenant and will also pass on to the Remainderman.
Talk to an Estate Planning Lawyer About Including a Right to Occupy in Your Will
This is just a starting point! Every family's situation is unique. Consulting an experienced estate planner can help you create a will that best suits your needs and protects your loved ones. Get in touch today to understand if a Right to Occupy is right for you.
