Many of us want to make sure that our loved ones are taken care of after we’re gone.
This is especially true when it comes to providing for a partner and children from previous relationships. It can be a delicate balance, ensuring everyone is secure without causing unintended complications. But what happens when those good intentions aren't clearly laid out in a Will? The consequences can be devastating, as one man's story perfectly illustrates:
The Tale of Gerald and Heather
Gerald had been married previously and had three children (now adults) with his first wife. They’d been divorced for 15 years, with Gerald planning that his three children would receive an equal share in his house as their inheritance.
In his later life, Gerald met Heather, and after a few blissful months, they decided to move in together. They chose to live in Gerald’s house, as it was bigger than Heather’s, and had no outstanding mortgage. They redecorated and had the garden landscaped to make the place feel like it belonged to both of them, and they were settled and happy.
But, two years later, Gerald suffered a heart attack and sadly passed away. Heather knew that Gerald wanted his children to inherit the house eventually, but he’d failed to make any provision for her housing in his Will.
Gerald’s children wanted to sell his house - the first to pay for private school fees, the second to buy a rental property, and the third to bolster their savings. They liked Heather well enough, but she wasn’t a priority to them, and as she wasn’t married to their father, she had no claim on the house. So now not only had Heather lost her partner, but she’d lost her home too.
Even after meeting Heather, Gerald still wanted his house to eventually go to his children as their inheritance. But he didn’t want Heather to have to leave the home she’d helped to create. After all, Gerald loved Heather, and he never intended for her to have to move and start again elsewhere.
Was there some form of protection Gerald could have put in place for Heather? Absolutely - Gerald could have added a Right To Reside clause to his Will.
What exactly is a Right To Reside Clause?
In the UK, when a Will includes a "Right To Remain," "Right Of Occupation," or "Right To Reside" clause, it's a compassionate legal provision designed to grant a specific individual the comfort and security of continuing to live in a property for a designated period. This arrangement often involves holding the property in a Trust and is a thoughtful way to protect a surviving spouse's or partner's home, especially in situations where families have blended.
This clause ensures that a beneficiary can live in the property for a specified period of time (which could be the remainder of their life), but they do not own it outright. The legal ownership is held by Trustees, and the property is destined for other named beneficiaries (the "remaindermen", in this case, Gerald’s children) after the Right To Reside ends.
Is this different to a Life Interest?
Yes - a Life Interest grants a beneficiary broad rights to use and benefit from a property or other assets for their lifetime, while a Right To Reside is a more limited and personal permission to live in a specific property. Both are commonly used in estate planning, particularly for blended families, to provide for a surviving partner while protecting the assets for other heirs, but they carry different levels of control, responsibilities, and flexibility.
Key features of a Life Interest Trust
Income generation: If the property is sold, the Trust can use the proceeds to buy another home or invest the money. The life tenant would then be entitled to any income generated by those investments.
Flexibility to move: If the life tenant wants to downsize or move closer to family, the Trust can sell the original property and purchase a new one. The Life Interest continues in the new home, with any surplus funds being held by the Trustees for the ultimate beneficiaries.
Ownership responsibilities: The life tenant is typically responsible for maintaining the property, paying repairs, and covering ownership-related taxes, as they have a proprietary interest.
Asset protection: The assets within the Trust are protected from being included in the life tenant's personal estate, which can safeguard them from care home fees and sideways disinheritance, where assets accidentally end up with a new family.
A Right To Reside, on the other hand, is a much more limited and personal arrangement. It is a simple permission for a beneficiary to live in a specific property for a certain period, which could be for their lifetime or until a triggering event occurs. The beneficiary's right is strictly confined to occupying the property, and their interest is not in the underlying capital.
Key features of a Right To Reside:
Personal and non-transferable: The right is personal to the named beneficiary and cannot be transferred, sold, or inherited by anyone else.
Ends on vacating: The right typically terminates if the beneficiary moves out of the property, which can offer less flexibility if their needs change.
No income rights: The beneficiary cannot rent out the property to generate an income. Their right is purely for occupation.
Minimal obligations: The Will can specify what the resident is responsible for, but it is often limited to things like utility bills and insurance, not the major maintenance costs.
No ownership or control: The right does not give the beneficiary any ownership or control over the property itself. The Trustees continue to own and manage it.
So which is right for you?
Choosing between these two options depends on your specific goals for both your surviving partner and your ultimate beneficiaries.
Choose a Life Interest Trust if: you want to provide your surviving partner with greater financial security and flexibility, including the ability to move house or receive income from the assets. It's the more comprehensive option for protecting your spouse while ring-fencing capital for your children.
Choose a Right To Reside if: you only want to provide a place to live for a dependant, and do not wish for them to have broader financial control. It provides limited security and can be the right choice when more extensive financial benefits are not needed or desired.
For most people, a Life Interest Trust offers the greatest flexibility, balancing the needs of the surviving partner with the long-term protection of the estate. However, it requires a higher level of administration by the Trustees.
Ultimately, crafting a Will that truly reflects your wishes and protects all your loved ones, especially in blended family situations, is a nuanced process. As Gerald’s story illustrates, even the best intentions can fall short without the right legal provisions.
Whether a Right To Reside or a Life Interest Trust is appropriate for your circumstances, or indeed another solution entirely, Will depend on your unique family dynamics and financial goals.
Adept Asset Solutions is here to ensure your estate plan is robust, legally sound, and provides the protection and flexibility your family needs. Our expertise can help you navigate these complex decisions and create a Will that truly secures the future for everyone you care about. Get in touch today.
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