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Right of Occupancy: What You Need to Know

What does "right of occupancy" mean and when does it come into play? Trust & Will explains what you need to know about the right of occupancy.

Patrick Hicks

Patrick Hicks, @PatrickHicks

Head of Legal, Trust & Will

The surviving spouse’s right of occupancy rule ensures that any spouse of a deceased person is allowed to remain in the marital home, even if someone else legally inherits it upon death. 

While designed to protect spouses, there are some cases where the lifetime right of occupancy can be taken advantage of. Ultimately, a right of occupancy establishes a legal agreement that can't be terminated, even by an inherited legal owner of a property.

This means even if you inherit a house from a parent, something unexpected like a last-minute remarriage might cause significant problems. If, when you inherit the home, there’s a surviving spouse, they can have a lifetime right of occupancy. This can become a complicated situation, and one that might require the use of an attorney to come to a resolution.

What Does “Right of Occupancy” Mean?

Right of occupancy means that someone has the right to live in a home after a spouse’s death, and nobody except the occupant has the ability to terminate the agreement. Additionally, if someone else inherited the property, the person with right of occupancy (the surviving spouse) doesn't have to pay rent, the mortgage (if there is one), or even insurance to remain in the home.

A surviving spouse’s right of occupancy gives them unlimited rights to live in the dwelling, independent of ownership rights, for as long as they wish. They can also move someone else into the home, and should they remarry, the right of occupancy could transfer to the new spouse if the original survivor passes away. 

Despite not having to pay rent or mortgage or insurance on the property, there are some costs a surviving spouse who isn’t the legal owner might incur to stay in a home. For example, they could have to pay for maintenance and upkeep on the property, utility bills, property taxes, and, if there’s a mortgage, the interest on the loan.

What Is a Homestead Right of Occupancy?

A homestead right of occupancy offers legal protection for families. It means a surviving spouse and/or minor children have the right to live in a home as long as they choose to after the death of the owner. Even if they weren’t the legal owner during the marriage, probate homestead laws offer certain rights.   

Homestead right of occupancy laws can differ from state to state, so it’s important to understand your state laws if you’re dealing with a right of occupancy issue.  

Right of Occupancy vs Life Estate: What’s the Difference?

A life estate differs from right to occupancy in that life estates are the rights to exclusive possession and use of a property during someone’s lifetime. 

The main difference between right of occupancy vs life estate deeds is that with a life estate, the Grantor (the person who legally gives someone the life estate) gives a life tenant rights that ensure the same things (protection) as a property owner has, but only during the life tenant’s lifetime. Upon his or her death, the property won’t necessarily go to the life tenant's Beneficiaries or legal Heirs. Rather, it’ll go to the Beneficiary that the Grantor designated.

A life estate is a type of right of occupancy, where someone can transfer their property before their death, but remain in the home under a lifetime right of occupancy. This can be a good option for anyone looking to transfer assets to heirs before they’re ready to leave their home. It’s often used when someone needs to apply for benefits and is looking for a strategic way to reduce their estate value. Reducing the value of an estate can make it easier to qualify for the benefits you need.

Want more information? Check out our Right of Occupancy vs Life Estate Deeds article. 

Update Your Estate Plan Today

Right of occupancy laws can wreak havoc for someone who inherits a home with a surviving spouse living in it. A complete, comprehensive, well-thought-out Estate Plan can help.

If you’re concerned about your assets and not sure what to do, it's time to start or update your Estate Plan. You don't want to leave loved ones stuck in a difficult situation, especially when potential issues can be effectively solved ahead of time. Take the time now to get organized and protect your future and the financial future of your heirs.

Protecting Assets for Your Heirs

Once you understand the concept of right of occupancy, you can better protect your assets for your intended heirs in the future. If you believe you may need care in the future, a lifetime estate might be something to consider. It allows you to transfer ownership of your home to an heir without impacting your ability to live there. Once this occurs, the home is no longer considered an asset of yours. Your heirs can do what they want with the property after you pass away, and you can lower your estate value and protect your right to coverage and assistance in your golden years. 

Create or update your Estate Plan today to protect your estate, your loved ones, and your legacy. Understanding the ins and outs of right of occupancy can be confusing at first, but taking the time to learn about this concept will save you, and your loved ones, a headache in the future. Take our free quiz to see where you should get started, or compare our different estate planning options today!

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