WE are often contacted by people who are entering into new living arrangements as a cohabitee either with or without children, whether in a civil partnership, marriage, or just living together.
Younger cohabitees might look to pool their assets, whereas older cohabitees may want to ringfence some, if not all, of their wealth. This may be to ensure that on the death of one of them, a substantial inheritance passes to their own children whilst also providing a way for the survivor of them to remain in the family home.
Such arrangements may often also be used to protect the interests of the survivor of a long-term relationship, where most of the other assets are passed down the generations, both for tax reasons and because they may have a greater need.
Careful consideration needs to be given to how rights of the family home are set out in a will.
Most often, the will gives the survivor a right of occupation in the property. Whatever the nature of the gift, the will often seeks to impose upon the survivor (whether a life tenant or licensee (the occupier)), responsibility for repairs, maintenance and insurance. There may also be provisions for the termination of the interest upon the occurrence of certain events, some of which may be difficult to determine. Whilst termination on re-marriage is easy to identify, what does “cohabiting” really mean, and when might, say, a lodger become a cohabitee.
Where the occupier is responsible for repair and maintenance, it should be established what these obligations are. Is the occupier required only to maintain it in the same condition as it was when their interest first arose or, if not in good tenantable condition, are they required to bring it up to, and maintain it in, a good state of repair?
The question of how the trustees will preserve a property in the event that the occupier doesn’t have the means, or inclination, to maintain it also needs to be addressed. In the latter case, the trustees could seek the assistance of the courts but that requires money.
In the interests of simplicity, the will should provide for the property insurance to be held by the trustees with the occupier reimbursing the premium.
The will may also provide for the proceeds of sale of the trust property to be used to purchase a replacement home for the occupier. There may be no desire to include a provision dealing with any surplus of the sale proceeds over the cost of the purchase but that is not always the case. If the surviving cohabitee is merely given a right of occupation, that right might only attach to the replacement property and not any realised surplus. In that case, the surplus might vest in the ultimate beneficiaries. If, however, the occupier is given a life interest in the property, the surplus would remain within the trust. A minor difference in the wording in the Will can have a significant effect on the outcome.
There will be situations where animosity between the life tenant and the other beneficiaries under the Will is already well known or anticipated when the Will instructions are given, and the Will is then drafted accordingly.
However, in many cases the relationships may appear sound, and it is only after the testator’s death that issues between the beneficiaries surface. When drafting a trust over real property, it might be prudent to provide both for the trustees to retain a maintenance fund and, subject to general guidance within the will, for the trustees to determine the terms upon which the occupier assumes occupation. These terms might be set out in a formal licence to occupy, in order to try and avoid future disputes.
Whatever the situation, the issues that co-habitees face when deciding how to deal with their home which is often their most valuable asset as well as balance the potential conflicting issues of their partner and children needs careful consideration.
