Right Of Occupation Clause

Trusts Discussion
1

I have a client who wishes to have a right of occupation clause rather than a life interest.

Can anyone see any issues with the following clause:

  1. Right of Occupation in The Home

1.1 My Trustees shall hold my share and interest in the property known as THE HOME [“the Property”] on Trust as follows:
1.2 If the above Property does not form part of my Estate I give instead the property which I owned and last used as my principal residence before my death.
1.3 The “Beneficiary” shall mean my husband KS.
1.4 The Trust Period shall mean the period between my death and the earlier of:
(a) the death of KS;
(b) the marriage of KS;
(c) the cohabitation of KS;
(d) the absence from the Property by KS for a period of three months, other than as a result of illness; or
(e) the Property (or any subsequent property as later provided in clause 1.8 (d)) no longer being resided in by KS.
1.5 To pay the income to my husband KS for the Trust Period.
1.6 Thereafter to hold the capital upon the Trusts of my Residuary Estate set out below in 8.2 and 8.3.
1.7 During the Trust Period my Trustees shall have power in their absolute discretion to pay or apply all or any part of the capital of this Trust to or for the benefit of KS notwithstanding the interest of those persons at clause 1.6 above.
1.8 During the Trust Period and for so long as this Trust includes the Property my Trustees:
(a) Shall not sell the said Property without the consent of KS;
(b) Shall allow KS to occupy the Property providing he complies with any obligations imposed by (c);
(c) Shall be free to impose such conditions as to the payment of insurance, outgoings and expenses of and relating to the Property as they think fit;
(d) If at any time KS shall request in writing the Trustees shall sell the Property and shall apply the whole or any part of this Trust in the purchase of another property whether freehold or leasehold and shall hold the same upon the Trusts contained in this clause as if references to the Property in this clause were a reference to the replacement property;
(e) In purchasing a replacement property in accordance with the previous power my Trustees may join with any person in purchasing an undivided share of land.
1.9 The right of occupation shall not take effect if I should be separated from KS at my death.

Any comments appreciated.

2

“The cohabitation of KS” is a little vague. Could you tighten it up a little?

Also, I don’t know whether it is still appropriate to talk about giving KS the income during the Trust Period, bearing in mind that the intention is to allow him to occupy the Home. Couldn’t you just say that? Or do you want to preserve his right to receive rent?

3

Just some quick thoughts:

· Clause 1.4(b) – marriage does not include entry into a civil partnership, which I understand is no longer limited to same sex-couples;

· Clause 1.4(c) – my understanding is that there is no clear definition of “cohabitation” so that it either needs to be defined within the trust instrument, or the trustees given power to determine what constitutes “cohabitation”; and

· Clause 1.4(d) – is this intended to apply in relation to any replacement property as well? As clause 1.4(e) specifically applies to subsequently acquired properties, the lack of reference in 1.4(d) would suggest otherwise.

· Clause 1.9 – what does “separated” mean? Does this require a judicial separation order, or is it sufficient for the testator and KS to be living apart (which can be the case even if living in the same property). In the absence of specific direction o this, should the executors be given power to determine what constitutes “separated”?

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals

4

Paul is quite right, I recall being called to perceived order by Richard Frimston on that point simply to be confirmed by the Supreme Court a year later.
Civil Partnerships were never actually limited to same sex partners, as Lady Hale was quick to deliver upon. Whilst politically the statute was clearly aimed at the single sex aspect, the non-discrimination aspect of the issue was fundamental to confirming the extention of its scope judicially.

If the aim is to fetter the surviving spouse’s rights, clause 4(b) might need some attention so as to include a civil partnership (whether with a person of the opposite sex or not is immaterial as a civil partnership can be more flexible for those more advanced in years).

Peter Harris
www.overseaschambers.com