October 04, 2013
What is the Right of Residence Trust?
A typical situation where this is a useful technique is where there is a sole owner of a property, who has a partner living with them, but has children from a previous relationship. Options should they die would usually be:
- Gift the house to those children (but then what happens to the partner – where do they live, as they have no right to continue to live in the house)
- Gift to the partner and hope they ‘do the right thing’ when they pass away and gift the house to their partner’s children.
Neither is ideal. The right of residence provides a best-fit solution:
- It provides a right for the partner live in the house once the owner has died
- Trustees then own the house and cannot sell it unless agreed by the partner
- The testator could decide whether that right continues for the life of the partner, or whether it needs to be time-restricted (i.e. for a couple of years) or event-restricted (not advisable but for example, should the partner marry or co-habit in the testator’s house)
- The trust almost always relates to the house owned by the testator so that should the life tenant / renter leave the house, the right comes to an end and the children – the remaindermen to the trust – then inherit absolutely. It is unusual for the testator to provide a right to allow the life tenant / renter to request the trustees sell the original house and buy another on their behalf on the same terms as the original trust property, but it can be done.
