Right to occupy or life interest - how surplus is dealt with on downsize if no terms in Will

Hi – hoping someone can lend some expertise on this one, details of key clause in question:

I give all my share and interest in my house known as [ ] or the house which at the date of my death constitutes the matrimonial home of my wife [ ] and myself (“the House)) to my Trustees to hold on trust for the sale but with the power to postpone the sale and in accordance with the following directions and conditions:’

(a) my wife [P] may live in the House and use it as her principal place of residence for as long as she wishes for her lifetime

(b) until [P] has in the opinion of my Trustees ceased to use the House as her principal place of residence it shall not be sold without her prior consent in writing

(c) when [P] dies or ceases to use the House as her principal place of residence whichever is the sooner the House shall form part of my Residuary Estate

(d) at [P’s] request my Trustees may sell the House and buy another one to which the provisions of this clause shall then apply

(e) on condition that for the duration of her occupation of the house [P] shall pay all rates and outgoings on it and keep it in good repair and insured to the satisfaction of my Trustees

I’d initially thought this was a right to occupy (not a life interest trust) but the lack of any limitation on time for the survivor to be under occupation (e.g. a year) and the fact it also didn’t expressly state this was only a right to occupy and not granting any other benefit, makes me think it’s a life interest, even though no income/capital benefit clauses).

The situation now arising is that the person who made this Will has died leaving surviving wife. The property in question is now being sold and another bought at less value. I’m wondering what should happen to the surplus funds (my initial reckoning is that, subject to costs/expenses for sale of property and dealing with administration of the Dec’d’s estate, then, after those payments: 50% of remainder goes to surviving spouse – but not sure about the 50% that would otherwise technically fall under the ‘life interest’ (if indeed there is one)?

(There are legacies to a number of people, numbering in the £1,000s, and the only monies are really in this property - so trying to determine whether spouse will keep it (after debts/costs) under life interest or should it be used to pay legacies and residue of estate.)

Any thoughts on this scenario much appreciated in advance.

This is a right to occupy and an IPDI.

As you say there is no provision saying what happens to the surplus proceeds.

P is not entitled to income. Perhaps it could be argued the cash should be kept until P’s death the residuary beneficiaries having the income in case P wanted to move again to a more expensive house. Alternatively the cash is used to pay the legacies and falls into residue.

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I think it would be wise for the trustees to seek the agreement of P to the surplus being used to pay the legacies and distribute any residue as they do not want to find that in the future P wants to move to a more expensive property and there are insufficient funds available. It may also be advisable to keep a reserve should they need to spend capital monies on the new property which would not fall upon P.

Patrick Moroney
BWL solicitors

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