Life estate or right of residence? How to provide a home in your will
You want to provide a home for your loved one in your will. You want your spouse to be able to live in the home until they die, when it passes to your children. So, what is the best way to protect their interests, while not disadvantaging others you wish to provide for in your estate? Is it through a life estate, or a right of residence?
Pros and cons of a life estate
A life estate, also known as a life tenancy, is an entitlement under a will that allows a beneficiary a right of use, enjoyment and possession of a property for the rest of their life.
It can be subject to conditions, such as the person not remarrying. It can also allow the person to rent, mortgage, or sell the property – as long as it is with the consent of the remainderman (the person who will eventually inherit the property).
The occupant in a life estate is liable to pay council rates and for maintenance of the property. The downside is that if they can’t afford to do this, the property may fall into disrepair. Another disadvantage is that the exclusive right to the property may mean other family members, such as children, are not entitled to use the property, which may not be the intention of the testator.
You can learn more about life estates on the Land Registry Services website. (See Registrar General’s Guidelines – Life Estates.)
Pros and cons of a right of residence
The other way to provide a home to your loved one after your death is by incorporating a right of residence in your will. The testator may choose this method if all they want to do is put a roof over the head of the beneficiary.
It allows for the beneficiary to reside in the property, but it cannot be rented, sold, mortgaged or used to make a profit. If those conditions are breached, the right is forfeited and both the right of residence and the property fall to the remainderman.
A right of residence protects the asset prior to the asset passing to the ultimate beneficiaries. It is of no value to anyone other than the beneficiary, so it cannot be claimed by creditors.
It is, however, restrictive if the beneficiary wishes to move, as they cannot relocate the right of residence to another property. Also, it does not allow generation of income for the beneficiary, so they are unable to use it for a money-making venture.
Determining whether a life estate or right of residence is the best option for you can be complex. It is important to seek specialist legal advice in this area of law, as careful wording is essential, regardless of whether you choose to provide a home via a life estate or a right of residence.