By Libby Banks, the Law Office of Libby Banks, PLLC
Often, a client asks me if we can give a life estate in a home to a beneficiary. The client wants to allow a loved one to occupy the home they are living in, even after the client passes away. The intent is to provide a home for their loved one without giving them complete ownership of the home.
A life estate is what it says: ownership of a property for the entire life of the beneficiary, even if they no longer can or want to live in the home. The life estate may not be what the client really wants. An alternative we offer is the right to occupy the home while the home is held in an Occupancy Trust.
The Occupancy Trust allows the client to tailor the terms according to their wishes. The Trust contains the terms that govern the loved one’s right to occupy the house. It might provide that the occupant must pay for all maintenance, utilities, taxes, insurance, and other expenses of the home while the occupant lives there, or the trust may include money for payment of all those expenses.
The Occupancy Trust can provide for how long the occupant may stay in the home. It can include a fixed length of time or allow the occupant to stay until they pass or can no longer live in the home. A right of occupancy is similar to a life estate, but the occupant cannot sell or transfer their interest in the property like a life estate beneficiary can, and the rights of the beneficiary can before their death.
Here are two examples of situations using the Occupancy Trust for planning:
John has a home in Phoenix, where his special needs brother Andy lives with him. John wants to provide a place for Andy for as long as Andy is able to live independently. John’s revocable trust states that on his passing, the house and a certain sum of money will be held in an Occupancy Trust for Andy. Upon Andy’s passing, or when he is no longer able to live there, the home is to be sold and the proceeds distributed to John’s two children.
Joan owns a home where she lives with her second husband. Joan wants her husband to have time to decide his next steps if she passes first. Her trust provides for an occupancy trust for her current husband, allowing him two years to live there. Upon her husband vacating the property it will be sold, and the proceeds distributed to named beneficiaries.
The Occupancy Trust can provide great flexibility for you if you are concerned about providing for a spouse or other loved one who is living with you. If you have a situation that might merit this planning, we can work through the terms of a plan that will fit you and your loved one perfectly. Call the Law Office of Libby Banks at 602-375-6752 or check out our website at libbybanks.com.
