Estate planning is about protecting the people who matter to you most. But sometimes this can be more complicated than it sounds—especially when one of the people you love may require additional support at your death. How do you make sure you’re taking care of them without doing so at the expense of others?
A right of occupancy trust may be the solution you need. As a part of estate planning, it can help you make sure a loved one can stay in your family home or another property you own that’s stable, safe and affordable.
What Is a Right of Occupancy Trust?
A right of occupancy trust is a special kind of trust that designates a beneficiary to live in your home or another piece of real estate you own. This includes a rental unit or vacation property. It may extend for a certain time period or until the beneficiary moves out or dies.
Right of occupancy trusts are put into action by including the provision in either your will or a special sub-trust agreement. The terms of the right of occupancy trust may identify who will manage it and may allocate money to cover any necessary maintenance on the property. The terms should lay out any responsibilities the trustee needs to undertake on the trust’s behalf.
You and your lawyer should talk about what happens to the property when the beneficiary moves out or dies. You could choose to keep the property in the trust to be used by someone else, or you could decide to outright give it to a different person. You could also choose to have it sold, and the proceeds directed to another beneficiary.
Key Things to Think About With a Right of Occupancy Trust
When deciding on a right of occupancy trust, it’s important to think through a few key issues related to the property. That way, you’ll help the person managing the trust make the right decisions while helping to prevent unnecessary stress.
Here are some important factors to consider:
- Decide whether personal property like furniture, appliances and personal effects should be included with the residence. This can include anything from jewelry to photo albums to books.
- Decide how much money you want to set aside to pay state and local taxes, property insurance, and utilities. You don’t have to leave money for these matters if you would like these things to be the beneficiary’s responsibility.
- Decide whether you’ll require the beneficiary to live at the property year-round. This is especially important if you’re dealing with a vacation home.
- Decide whether you’ll allow the beneficiary to invite someone else to live at the property, like a new spouse or a friend.
- Decide what happens if the beneficiary gets remarried or is admitted to a long-term care facility.
Why You Should Consider a Right of Occupancy Trust
Right of occupancy trusts are great estate planning tools that can be critical in certain situations.
If you want to provide for your spouse when you pass away but don’t want to disinherit your children from a prior relationship, you may need one. A right of occupancy trust could mean that your spouse continues to live in your home for the rest of their life before the house passes to your children.
Right of occupancy trusts can also protect property that has been in your family for generations. You may want your surviving spouse to continue to live there, but also to ensure that the property stays in the family.
These trusts are also good for protecting loved ones who are dependent on you, giving you the peace of mind that they will have a place to live after you pass away.
It Takes Good Communication and a Team to Support Your Financial Interests
Solid, effective estate plans are the result of careful consideration and communication across a team of professionals. It’s important to work with your team to help you implement an effective right of occupancy trust that works the way you intended.
Your team may include:
- A financial advisor: This person can help you evaluate your finances and property. This includes helping you plan for how much money you’ll need to cover taxes and expenses, and to maintain the property
- An insurance agent: An agent can make sure the property will continue to be properly insured, even as it switches owners.
- A tax advisor: Consult with a tax advisor on important tax implications, including income tax deductions, tax exemptions and caps on the amount of tax.
- An estate planning attorney: It’s essential to have an experienced estate planning attorney to draft the trust and all other related documents in a way that will stand up in court.
Talk With an Attorney About a Right of Occupancy Trust
A solid estate plan requires the guidance and support of a knowledgeable attorney. Janet L. Brewer can talk with you about the best way to protect the people you love, especially when it comes to providing a home for them. To learn more about your options related to a right of occupancy trust, call the Los Altos law office at 650-405-0711 or contact us today.
