Use and Occupancy Clauses: Controlling homes after death

Family situations are different and fluid. For many, protecting and transferring the use and ownership of Real Estate is a major concern. When families have multiple children, homes tend to be a point of contention. Often after the passing of their parents, children will sell any Real Estate, which many of their parents would not have wished. This is especially true for vacation homes, homes in scenic locations, or homes which parents hope remain in the family. For many of these situations, many Estate Planning Attorneys will recommend including in your Trust a set of “Use and Occupancy” clauses.

Use and Occupancy clauses are a general and broad term. Attorneys will often disagree about their specific classification and use in Estate Planning. Your Trust may have a completely different and customized set of language to the family next door. However, a few general ideas can often be found. I would classify these differences into three major categories: Time, Cost, and Rental.

The first of these, time, generally refers to clauses which specify a minimum or maximum time spent in a home to remain qualified for Use and Occupancy. Often, a child will be living with parents when their life is waning. Perhaps because it is their home, perhaps as thanks, perhaps to simply ease the transition, a parent may authorize the child to remain in the home after their passing for a certain period of time. For example, let us assume that Mark, a child of John and Mary, has lived with them for the past 5 years. John and Mary may wish for John to remain in the home if he chooses to for a year after their passing, so that he may buy his own home. They can add this wish in as specifically through a Use and Occupancy clause. This clause will specify that Mark has the right to Use and Occupy the property in question until either Mark moves out, or a year passes.

Say instead the property is a vacation home on Cape Cod, and the family has four sons. A Use and Occupancy clause can be used to specify that each son may use the property for a maximum time within each year so that each son may have the ability to use the property without one of them hogging the property. This clause will be likely to prevent a fight between the children. While disagreements may arise among children as to who gets to use the home, when, and how much, time-related clauses can settle any disagreement before it becomes a problem, and can act as a way to head off any litigation.

Perhaps instead the home is of significant emotional value, something more and more likely with a longtime family home being passed down.. To incentivize the child to remain in the property, clauses can be structured so that if a beneficiary does not maintain residency at the property, the property can be sold and its value passed on. These clauses can use time for several purposes, all to attain your wishes after you pass, to protect your home, and to keep families from fighting.

Second come provisions related to cost. Homes are expensive, even without a mortgage. Property tax will drain every year, and will almost certainly continue to rise every year. Perhaps the home will need a new roof, a new porch, a landscaping bill, there are a hundred reasons why homes need money to continue. While one could certainly make the Trust responsible to bear the cost of keeping up a vacation home, that requires leaving a nest egg to the Trust which can pay expenses through investment gain. This isn't just a risky proposition, it can leave children feeling resentful. Instead, the cost of maintaining the property can be split among the children or other beneficiaries who use the property. Their continued use can even be conditioned on payment of the upkeep of the property.

For example, let's say that you are leaving a home to two children that has stayed in the family for a long time, and you want it to stay that way. Your Trust’s relevant clause may include that each child has the right to use and occupy the property so long as they each pay ½ of the total costs of the property, and that if they fail to do so, they lose access to the property.

At the end of the day, your Estate Planning must reflect your goals and wishes. These clauses may not be needed in your plan at all, but they may provide a useful tool in making sure that your wishes are met after you have passed on. To see what works best for you, please reach out so that we may have a conversation about your goals. Perhaps clauses like the ones described above will help you, as they have helped so many before.