An Occupancy Trust Can Help Multiple People In Your Estate Plan

When it comes to real property, like homes, there really are two separate rights. One right is the right to actually live in the property, and make it your home. That’s just possession, much like a tenant would rent property from a landlord. Then there is actual ownership, which gives someone the right to sell the property, make money from it, encumber it with liens, or do any other number of things with it.

In estate planning, you can separate these two interests, when leaving real property to your estate’s beneficiaries.

Why Separate the Interests?

This can be helpful when you have someone who may need to live in the property, but you still want to actually leave the property to someone else.

For example, let’s say that you had a relative who was disabled, and you were concerned that the person needs someplace to live, (either rent free, or with a small amount of rent). On the other hand, you don’t want to leave the property itself to that relative.

Another use is where you have a spouse and you want him or her to be able to live in property, but you have children from a prior relationship or marriage, and you want them to have a financial interest in the property. The spouse can occupy the property, while the children are the actual owners.

The Occupancy Trust

To accomplish these goals you can, as part of your estate plan, transfer the property to a trust upon your passing, with instructions to the trustee to allow your designated person to live in the property. This kind of trust is often called a right of occupancy trust.

Of course, property has expenses attached to it, so in your trust, you will have to account for those expenses. You can either leave funds in the trust to pay for those expenses, unless you feel that whomever is living there can pay those expenses.

The property will be titled in the name of someone else, who will inherit it fully when the occupant dies, moves away, or when another milestone (whatever you designate) happens.

The Trust Agreement

The trust agreement works much like a traditional lease, albeit one that is likely more favorable to the occupant you have designated. The trust agreement will say who is responsible for things like repairs, taxes, or maintenance on the home.

Your estate plan will plan for the contingency of either the occupant, or the ultimate beneficiary (legal owner) passing away, and what happens in that event.

You can even limit occupancy—for example, you can restrict the property to only the person who you want to occupy it if you so choose. You can add a rent provision, which would go to other beneficiaries, in the event that the occupant married, or ever hits a given pre-designated income level.

The trust also should address whether the occupancy has to live in the property full time, and if so, what full time actually means.

Call the Torrance will and estate attorneys at Samuel Ford Law today to help you create an estate plan that helps your family and loved ones.