Estate planning is all about protecting you and your loved ones. If you have a loved one that you want to provide a home for after you pass away, while having ultimate ownership pass to someone else after that loved one’s death, a right of occupancy trust can provide a solution. 

What is a right of occupancy trust?
A right of occupancy trust is a provision in your will or living trust that gives a named person the right to reside in your property for a period of time or for their lifetime, and then distributes the property to another beneficiary following that time. This provision creates a subtrust, called a right of occupancy trust, to establish the rules and guidelines for the beneficiary’s right to the property. The beneficiary’s rights and responsibilities are detailed within the trust, as well as what happens to the property at the end of the term of occupancy.  

What should be included?
You can address a number of things with the right of occupancy. Be careful to include your directions concerning these various matters:

• Is the tangible personal property (furniture, appliances, keepsakes) included with the property?
• Do you want to set aside money for costs associated with the property, such as property taxes, assessments, utilities, property insurance, and mortgage payments, or will these be the beneficiary’s responsibility?
• If the property includes a residence, does the beneficiary have to live there full-time? What should happen if the beneficiary spends significant time somewhere else?
• Can the beneficiary allow a subsequent spouse, friend, or companion to live at the residence?
• Does the beneficiary have the right to stay at the residence for their lifetime? If they were to remarry or move into a long-term care facility, should that terminate the beneficiary’s right to the property?

 When to consider a right of occupancy trust?
If you have a residence in your sole name, you want to ensure that your surviving spouse or partner has a place to live after your death, and you want to avoid disinheriting your children from a previous relationship, this strategy will enable you to protect all parties.

When you have property that has been in your family for generations that you ultimately want to pass to your children or grandchildren, but you want your surviving spouse or partner to be able to use the property for their lifetime, a right of occupancy trust can assist you with this goal.

If you have a loved one who is dependent on you and you want to ensure that they have a place to live after your passing, a right of occupancy trust can provide that security for your loved one, while also protecting the home for the benefit of other loved ones in the future.

You Deserve a Team to Support You
To ensure that your wishes are carried out, it is important that your team of advisors work together to anticipate, plan, and execute all aspects of this strategy.

A financial advisor can help you evaluate your current financial holdings and plan to ensure that money is available to maintain the property if you intend for most of the expenses to be covered by the trust.

Your insurance advisor can help ensure that your residence is properly insured through all of the different ownerships. Make sure that insurance is available to cover the needs during your lifetime, while a trust is owner, and when the property is transferred to the ultimate recipient, whether it is an individual or another trust. Your insurance advisor can also help you explore life insurance options if you do not wish to tie up financial resources or cash assets to provide the funds needed to maintain the residence.

In addition, a tax advisor should be consulted to discuss the important tax implications of a right of occupancy trust. The tax advisor can answer questions such as:

• Will your beneficiary be allowed to take any income tax deductions with respect to the property?
• Will the property qualify for any applicable property tax exemptions that may currently be lowering the property tax bill?
• Will the property tax be uncapped at any point during the funding or trust administration?

We can help you explore your options for how your property is handled and how you want to provide for your loved ones. We can help you to create a comprehensive plan that will provide you with peace of mind, ensuring that your plan will proceed smoothly at your passing and that your loved ones will be taken care of. Please schedule an appointment with us to learn more about how we can customize an estate plan to protect you and your loved ones.