Estate Planning, trusts, right of occupancy versus life estate.

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Right of Occupancy v. Life Estate Many revocable trusts provide that a surviving spouse or another beneficiary has the right to live in a residence rent-free for the remainder of his or her life.  This type of provision is particularly common in a second marriage when the person who created the trust (the Trustmaker) comes into the marriage with a home that is separate property and wants the surviving spouse to be able to live there before the property passes to the Trustmaker's children or other heirs. Sometimes this occurs when one adult child caretaker ha lived with the parent in their final years, and the parent wants to allow the adult child to live in the home for a period of years as a "reward" for faithful care. Right of Occupancy:  The right to live in a home that does not belong to you is typically referred to as a "life estate," or a "right of occupancy."  They are not the same thing. A right of occupancy does not grant the holder any kind of title to the property in question.  During any period of occupancy, the title is held by the trustee of the trust.  The holder has the exclusive right to occupy the property, although usually subject to certain conditions. Unless spelled out in the trust document, there are often disputes between the person occupying the property and the remainder beneficiaries about who is responsible for the expenses regarding the property, such as utilities, property taxes, insurance, maintenance, etc.  The law is unclear about whether someone with a right of occupancy can bring in other residents, like a new spouse or life partner.  Also unclear is whether the Trustee can sell the underlying property and terminate the right to occupancy. Life Estate:  A life estate is transferred through a recorded deed.  A life estate tenant, by law, is responsible for upkeep and repairs, mortgage payments, taxes, and other annual charges, unless the trust says otherwise. Estate Taxes:  There is also an important tax issue in play.  If the right of occupancy is provided in a marital deduction trust of a high-net-worth Trustmaker, and the surviving spouse doesn't provide a full, unfettered right to occupy the residence for life, the settlor's estate could lose the marital deduction on the residential property and be subject to estate taxes.  An example of this is when the right of occupancy would terminate if the surviving spouse does not live in the home or allows others to do so. Consult with an experienced estate planning attorney about your estate planning wishes.

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Choosing a Guardian for Your Children

If you are a parent and you are considering estate planning, one of the most difficult decisions you will have to make is choosing a guardian for your minor children.  It is not easy to think of anyone else, no matter how loving, raising your child. Yet, you can make a tremendous difference in your child’s life by planning ahead.
The younger your child, the more crucial this choice is, because very young children cannot form or express their own preferences about caregivers. Yet young children are not the only ones who benefit from careful parental attention to guardianship. Children close to 18 years old will be legal adults soon, but, as you well know, may still need assistance of a parental figure after the fact.
By naming and talking about your choice of guardian, you can encourage a lifelong bond with a caring family. The nomination of guardians is a straightforward aspect of any family’s estate plan. It can be as basic or detailed as you want. You can simply name the guardian who would act if both you and your spouse were unable to or you can provide detailed guidance about your children and the sort of experiences and family environment you would like for them. Your state court, then, can give strong weight to your expressed wishes.
There are essentially four steps to this process. First, make a list of anyone you know that might be a candidate for guardian of your children.  It is important to think beyond your sisters and brothers and consider cousins, aunts and uncles, grandparents, child-care providers and business partners. You might also want to consider long-time friends and those you’ve gotten to know at parenting groups as they may share similar philosophies about child-rearing. Second, make a list of factors that are most important to you. Here are some to consider:

• Maturity
• Patience
• Stamina
• Age
• Child-rearing philosophy
• Presence of children in the home already
• Interest in and relationship with your children
• Integrity
• Stability
• Ability to meet the physical demands of child care
• Presence of enough “free” time to raise children
• Religion or spirituality
• Marital or family status
• Potential conflicts of interest with your children
• Willingness to serve
• Social and moral habits and values
• Willingness to adopt your children

You might find that all or none of these factors are important to you or that there are others that make more sense in your particular situation.  The third step is to, match people with priorities. Use the factors you chose in step two to narrow your list of candidates to a handful.
For many families, it is as easy as it looks. For others, however, these three steps are fraught with conflict. One common source of difficulty is disagreement between spouses. But, consensus is important. Explore the disagreements to see what information about values and people is important to one another and use all of your strongest communications skills to understand each other’s position before you try to find a solution that you can both feel good about. Step four is to make it positive. For some parents, getting past this decision quickly is the best way to achieve peace of mind and happiness. For others, choosing a guardian can be the start of an intensive relationship-building process. An attorney who understands where you and your spouse fall on that spectrum can counsel you appropriately.

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