Estate planning is designed to protect you and your loved ones. Sometimes offering such “post mortem protection” for a dependent loved one can be challenging. While you may want to give substantial benefit to a dependent loved one, you may also want to provide for other independent loved ones and heirs. A Right of Occupancy Trust can design use and ownership terms of your real estate after your death.
What is a Right of Occupancy Trust ?
A Right of Occupancy Trust lets you designate a family member or other loved one to live at your residence or use other real estate for a specific time period or until the beneficiary dies or moves away. To implement this strategy, you include Occupancy Trust language in your Will or Trust agreement to add the property to a separate sub-Trust, to be overseen by your Trustee. Money may be allocated to the sub-Trust for the property’s maintenance expenses.
The Trust instructions outline the rights and responsibilities of the Trust beneficiary and the Trustee and next steps after death of the initial beneficiary. The property could be used by a subsequent beneficiary or it could be given outright to a subsequent beneficiary. In the alternative, the Trustee could be directed to sell the property (assuming no adverse homestead tax credit or other negative financial impact) and hold the money in Trust or distribute it outright to one or more beneficiaries.
What issues does a Right of Occupancy Trust address?
Answers to questions such as these help ensure clear guidance for the use and occupancy of your real estate after you pass:
- Is the tangible personal property (e.g., furniture, appliances, knickknacks, etc.) included with the real estate, to be used during the lifetime of the beneficiary ?
- How much money do you want to include for administrative costs, state and local taxes or assessments, utilities, property insurance, and mortgage payments, or will these expenses be the beneficiary’s responsibility?
- Must the Trust beneficiary live in the property full-time?
- May the beneficiary’s subsequent spouse, friend, or companion to live with the beneficiary at the property?
- Does the beneficiary have a right to live in the property for life, or is there some other contingency (e.g., remarriage, being admitted to a long-term care facility, etc.) that terminates the beneficiary’s use of the property ?
When should consider a Right of Occupancy Trust ?
If you have a residence in your sole name but after your death, you want your surviving spouse to have a place to live, but you also want to provide for your children from a previous relationship, an Occupancy Trust will help achieve get you there.
For instance, if you have real estate that has been in your family for several generations, a Right of Occupancy Trust can authorize your surviving spouse to use the property during his or her lifetime. After the death of your spouse ownership of the property can vest in the children from the prior relationship.
If you want a dependent loved one to live in your property after you pass, a Right of Occupancy Trust can provide a life time home for him or her. After the death of the dependent loved one, the home can pass to your children or other beneficiary.
A Team of Legal Financial and Insurance Experts Can Help Create and Customize an Occupancy Trust that Reflects Your Wishes
In order to plan, and execute the best version of your Occupancy Trust, you will need legal, financial and insurance input and counsel.
A financial advisor can evaluate your current financials and then help identify and list the property expenses you want covered by the Trust .
An insurance agent can ensure that your residence or other property is appropriately insured for the scenarios outlined in your Trust. The insurance agent can also offer insurance options to help maintain the residence.
A tax advisor should review and discuss any significant tax implications of a Right of Occupancy Trust and help you answer questions such as:
- Will your beneficiary take any income tax deductions for maintaining the property?
- Will the property qualify for any property tax exemptions?
- Will the property tax lose its “tax ceiling” or cap during the Trust funding or Trust administration process?
The lawyers at Cox Law Group are available and ready to counsel you about the terms of your Right of Occupancy Trust. Once you have decided on the Trust terms, we will create a legally valid Trust that gives you peace of mind that your loved ones will be provided for after you pass.
If you are interested in learning more about a Right of Occupancy Trust or other estate plan options to protect you and your loved ones, please call us to schedule an appointment. (410) 988-3973. www.TheCoxLawGroup.com. We look forward to working with you !