The Right of Occupancy: A Guide for California Homeowners

When it comes to determining what happens to the family home after the passing of a spouse, it’s important to understand the options available to you. One such option is the right of occupancy, which allows the surviving spouse or domestic partner to continue living in the home for the remainder of their lifetime. A right of occupancy can be provided in a properly drafted revocable living trust. However, it’s important to understand exactly what this means for you and your family and to ensure that your rights are protected. 

Here are four things you need to know about the right of occupancy in California:

1. What is the right of occupancy?

The right of occupancy is a personal right that allows the surviving spouse or partner to continue living in the home but does not grant them ownership of the property. Instead, the title to the home is held by the trustee of the trust, who is responsible for paying any mortgage, insurance, property taxes, and maintenance costs. Here are some important details to keep in mind about the right of occupancy:

• Personal right:

  The right of occupancy is a personal right that provides the surviving spouse or partner with the ability to continue living in the home after the passing of their loved one.

• No ownership:

  The right of occupancy does not grant the surviving spouse or partner ownership of the property. The trustee of the trust remains the legal owner of the home.

• Trustee’s responsibilities:

  The trustee of the trust is responsible for paying any mortgage, insurance, property taxes, and maintenance costs associated with the property.

• No sale or transfer:

  The right of occupy cannot be sold or transferred, and the home cannot be sold or transferred during this time either. This means that the surviving spouse or partner cannot sell or transfer the right of occupancy to someone else.

• Time frame:

  The right of occupancy typically lasts for the lifetime of the surviving spouse or partner, unless otherwise specified in the trust agreement.

• Protection:

  The right of occupancy is designed to provide protection to the surviving spouse or partner, ensuring that they have a secure place to live after the passing of their loved one.

Overall, the right of occupancy provides a valuable option for California homeowners who want to ensure that their surviving spouse or partner has a secure place to live after their passing. By understanding the details of the right of occupancy, homeowners can make informed decisions about their estate plans and protect their loved one’s future.

2. Right of occupancy vs life estate

A life estate and a right of occupancy are similar in that they both allow a person to live in a home for the remainder of their lifetime, but there are some key differences:

• Ownership of the property:

  A right of occupancy does not grant ownership of the property to the surviving spouse or partner. Instead, the title to the home is held by the trustee of the trust, who is responsible for paying any mortgage, insurance, property taxes, and maintenance costs. On the other hand, a life estate gives the surviving spouse or partner a form of legal title to the property that can be sold. This means that if the surviving spouse or partner wants to move, they can choose to sell or rent their interest in the family home.

• Ability to transfer interest:

  Under a right of occupancy, the right of occupy cannot be sold or transferred, and the home cannot be sold or transferred during this time either. This means that the surviving spouse or partner cannot sell their interest in the property to a third party. In contrast, a life estate can be sold by the surviving spouse or partner to a third party, who will retain the right to the home for the remaining life of the surviving spouse.

• Inheritance:

  After the surviving spouse or partner dies, the property passes to the remainder beneficiaries under both a right of occupancy and a life estate. However, with a life estate, the property passes to the remainder beneficiaries in fee simple absolute ownership, meaning they have full ownership rights to the property. With a right of occupancy, the title to the home is still held by the trustee of the trust and the remainder beneficiaries only receive the property subject to the right of occupancy.

Understanding these key differences can help you make an informed decision about what’s best for your family and ensure that your rights are protected.

(See Cal. Prob. Code §§ 15300–15301.)

3. What are some common conflicts to watch out for?

Conflicts can easily arise between the trustee, the person with the right of occupancy or life estate, and the remainder beneficiaries who will receive the property after the surviving spouse or partner dies. Without proper drafting, issues such as the payment of expenses for the home can quickly become an argument between all parties involved. To minimize these conflicts, it’s important to ensure that your trust is properly drafted and designed to address common issues that may arise.

Common conflicts to watch out for when dealing with a right of occupancy or life estate include:

• Payment of expenses for the home:

  Conflicts can arise between the trustee, the person with the right of occupancy or life estate, and the remainder beneficiaries over who is responsible for paying expenses such as mortgage payments, insurance, property taxes, and maintenance costs. Without clear and specific instructions in the trust document, this issue can quickly become an argument between all parties involved.

• The sale of the property:

  The person with the right of occupancy or a life estate may wish to sell the property, which can cause conflicts with the trustee and remainder beneficiaries. The trustee may not want to sell the property as it is required to be held until the surviving spouse or partner passes away. The remainder beneficiaries may not want the property to be sold because it affects their inheritance.

• Disputes over repairs and maintenance:

  Conflicts may arise if the person with the right of occupancy or life estate does not maintain the property or if they make modifications to the property without the trustee’s approval. The trustee and remainder beneficiaries may not agree with the changes made or the expenses incurred, leading to disputes.

• Personal disputes:

  Personal disputes can arise between the parties involved, such as the trustee, the person with the right of occupancy or life estate, and the remainder beneficiaries. These disputes can be related to money, the use of the property, or any other issues that may arise.

To minimize these conflicts, it’s important to ensure that your trust is properly drafted and designed to address common issues that may arise. The trust document should provide clear instructions on who is responsible for paying expenses, how the property can be sold or transferred, and how disputes should be resolved. It’s also important to communicate with all parties involved and to seek the advice of an experienced estate planning attorney to help you navigate any potential conflicts.

5. How can I ensure my rights are protected?

Setting up a trust with a right of occupancy or a life estate can be complex, given the many variables at play. If you’re considering adding a right of occupy or life estate to your estate plan, it’s important to consult with an experienced estate planning attorney. They can help you make the best decision based on your individual circumstances and ensure that your rights are protected. Some tips to consider:

Consult with an experienced estate planning attorney

Consulting with an experienced estate planning attorney is essential to ensuring that your rights are protected. A good attorney will have experience working with clients in similar situations and can advise you on the best course of action based on your individual circumstances. They can also help you properly draft your trust and ensure that all parties rights and interests are clearly defined.

Clearly define the terms of the trust

To minimize conflicts, it’s important to clearly define the terms of the trust, including who will be responsible for paying for expenses related to the home, such as mortgage payments, property taxes, and maintenance costs. The trust should also clearly specify who has the right of occupy the home and for how long. This will help prevent misunderstandings and conflicts from arising down the line.

Consider including a dispute resolution clause

A dispute resolution clause can help prevent conflicts from escalating by providing a clear process for resolving disputes between parties. This can include mediation or arbitration and can help prevent parties from taking legal action against one another.

Review and update your trust regularly

It’s important to review and update your trust regularly to ensure that it continues to reflect your wishes and changing circumstances. This is especially important in situations where there are multiple parties involved, such as with a right of occupancy or life estate, as circumstances can change quickly.

Communicate openly with all parties involved

Open communication is key to ensuring that all parties rights are protected. This includes communicating openly with the trustee, the person with the right of occupancy or life estate, and any remainder beneficiaries. It’s important to make sure that everyone understands their rights and responsibilities under the trust and to address any issues or concerns that may arise in a timely and respectful manner.

Five Key Takeaways about “The Right of Occupancy”

1. A right of occupancy allows the surviving spouse or partner to continue living in the home but does not grant them ownership of the property.
2. A life estate gives the surviving spouse or partners a form of legal title to the property that can be transferred.
3. Conflicts can arise between the trustee, the person with the right of occupancy or life estate, and the remainder beneficiaries.
4. It’s important to ensure that your trust is properly drafted and designed to address common issues that may arise.
5. Consult with an experienced estate planning attorney to make the best decision for your individual circumstances.

Now that you have a better understanding of the right of occupancy under California law, it’s important to take action to protect your rights and those of your loved ones. Estate planning can be complex, especially when dealing with issues such as blended families and the passing of a spouse or partner. Our estate planning team at Naimish & Lewis has extensive experience in advising clients on these matters and can provide you with the guidance and support you need.

We invite you to schedule an initial consultation with one of our experienced estate planning attorneys. During the consultation, we will review your individual circumstances and help you create an estate plan that addresses your unique needs and concerns. We will work with you every step of the way to ensure that your rights are protected and that your wishes are carried out.

Don’t leave your future to chance. Contact us today to schedule your initial consultation and start planning for a secure future for you and your loved ones.