Right of Occupancy Trust: Protect Your Home and Loved Ones!

The purpose of estate planning is to safeguard you and your loved ones. When there is a loved one who may need additional support after your death, this can be a challenging task. You may wish to give this person as much as possible, but you may not wish to do so at the price of others you care about. A right of occupation trust can help you arrange for this circumstance in terms of property ownership and use.

What is a right of occupancy trust?

Through a right of occupancy trust, you can give someone the right to live at your home or another real estate until they die or move out, or for a certain amount of time.

This may be implemented by providing a provision in either a last will and testament or a trust agreement, which places the real property into a separate subtrust overseen by the trustee designated by the grantor. This provision will allocate money to the subtrust in order to cover the property’s maintenance expenses and will include instructions outlining the beneficiary’s rights and responsibilities, as well as the trustee’s responsibilities on the trust’s behalf.

Additionally, the trust instrument will direct what happens to the property once the beneficiary passes away, which may include keeping the property in the trust for another beneficiary, giving it outright to a beneficiary, or selling the property and holding the money in trust for someone’s benefit or distributing it outright to a chosen beneficiary. It is important to note that selling the property can have adverse impacts on homestead status, and the trustee should get legal advice before selling.

Important questions to ask yourself

Considering these questions is essential for successful implementation of this strategy, as it ensures that your instructions are concise:

  • Is the tangible personal property, such as furniture and appliances, included with the property?
  • Would you like to allocate funds for administrative costs, state and local taxes or assessments, utilities, property insurance, and mortgage payments, or will the beneficiary be responsible for these expenses?
  • If the property includes a residence, does the beneficiary have to live there full-time? Are they permitted to allow a subsequent spouse, friend, or companion to reside at the residence?
  • Does life changes, like remarriage or admission to a long-term care facility, terminate the right of the beneficiary to stay at the residence?

Is a Right of Occupancy Trust an appropriate solution for you?

If you have a home solely in your name and wish to guarantee your surviving spouse a place to live without risking disinheriting any children from a prior relationship, this approach can provide security for all involved.

If you desire to keep the property within your family’s bloodline by allowing your surviving spouse to use the asset for their lifetime, while ultimately passing ownership to your children, a right of occupancy trust can help to fulfill 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.

Creating a support team to setup a right of occupancy trust

It is important to involve your team in order to guarantee the realization of your wishes. To do this, a financial advisor should be consulted in order to assess your current financial assets and determine what steps should be taken to guarantee the availability of funds for property maintenance, should the trust be responsible for covering most of the expenses.

An insurance agent should also be consulted to ensure that the residence is correctly insured under all the different ownerships (yours, the right of occupancy trust’s, and the ultimate recipient’s, whether a remainder beneficiary or another trust). Additionally, the insurance agent can offer advice regarding life insurance options should you lack the financial resources or cash assets to provide the necessary funds to maintain the residence.

A tax advisor should be consulted to discuss important tax implications of a right of occupancy trust and to answer these important questions:

  • 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 also help you in determining your preferences for handling your assets and providing for your family. Afterwards, we can guarantee that your wishes are lawfully binding and will be followed through after your death, providing you with the assurance that everything will go as planned and your family will be taken care of.

Contact us to set up a consultation if you’re curious about right of occupancy trusts or any of the various ways we may personalize an estate plan to safeguard you and your loved ones.

750 F Street, Suite 2
Davis, CA 95616

333 University Ave, Suite 200
Sacramento, CA 95825

3017 Douglas Blvd, Ste 300
Roseville, CA 95616

288 Pearl Street
Monterey, CA 93940

San Antonio
18756 Stone Oak Pkwy, Ste 200
San Antonio, TX 78258

We operate on an appointment-only basis other than our Davis office.

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