A common issue in second marriages or where couples are not married is what will happen to the family home on the death of the first person. This is especially true if only one person is on title to the real property.
There are a couple of different ways to handle this issue. One option is for the surviving spouse or partner to have a right to occupy the property during the remainder of their lifetime. In this case, the surviving spouse or partner would not have any ownership interest in the real property and would not be on title to the real property. Usually, during the period of occupancy, title to the real property is held by the trustee of the deceased person's trust. The right to occupy is a personal right and therefore cannot be sold or transferred. The person with the right to occupy may or may not have responsibility for expenses related to the property. The right to occupy is also sometimes used to help adult children who need additional time to save money or resolve other issues.
A second option is for the surviving spouse or partner to have a life estate in the real property. Unlike a right to occupy, a life estate is a form of legal title to the property which the holder can sell. If the spouse or partner needs to move, they then have the “right” to sell their interest in the real property i.e. the value of the remaining life to a third party. Depending on the relationship with the other beneficiaries, the couple may want the surviving spouse to have a life estate to avoid any dispute with the remainder beneficiaries as to the rights of the surviving spouse.
Whether you choose to include a right to occupy or a life estate in your estate plan, it is very important to address issues surrounding the occupancy. The most common issues are the payment of expenses on the property, who may occupy the property, what will happen during any period of absence, and the right to sell the property if the surviving spouse only has a right to occupy the property. Given the issues involved, the couple should consider having an agreement separate and apart from the owner's trust outlining the intentions of the parties which can be signed by the party who will have the right to occupy or be receiving the life estate interest.
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