Why Would You Need a Property Trust?
A property trust in your will is most commonly used in second relationship and blended family situations. Here is a typical example:
A husband and wife each have children from previous relationships. They own their home as tenants in common. The husband wants his wife to be able to stay in the home after he dies — but he also wants to protect his share of the property for his own children when his wife eventually dies. Without a property trust, the husband's share would pass outright to his wife. She could then leave it however she wished in her own will — potentially to her own children, cutting out the husband's children entirely.
A property trust prevents this. The husband's share is held in trust. The wife has the right to live there for the rest of her life. When she dies, the husband's share passes to his chosen beneficiaries — his children.
Property trusts are also used to protect a property from being redirected through a surviving spouse's remarriage, or to ensure that a vulnerable beneficiary has a secure home without outright ownership creating complications.
What is a Life Interest Trust Over Property?
A life interest trust over property gives a named person — the life tenant — the legal right to occupy the property, or your share of it, for their lifetime. The life tenant does not own the property. They have a right of occupation — the right to live there rent-free.
The property itself is held by trustees, who manage it in accordance with the terms of your will. When the life tenant dies — or when any conditions you have specified are met — the property passes to your chosen final beneficiaries, known as the remaindermen.
The life tenant is usually responsible for council tax, utilities, buildings insurance and general maintenance costs while they are occupying the property, unless your will states otherwise.
What is a Right of Occupation?
A right of occupation is a personal right to live in a property for a defined period or subject to specified conditions. Unlike a life interest trust, a right of occupation does not give the occupier any beneficial or legal interest in the property itself. It is a more limited and more controllable right.
A right of occupation is often used where you want to give someone a home for a fixed period — for example, until they remarry or until children reach a certain age — rather than for their lifetime.
The trustees named in your will retain full legal ownership and control of the property throughout the right of occupation. The occupier cannot sell the property, receive income from it or redirect it.
Key Differences Between a Life Interest and a Right of Occupation
Both protect your property for your final beneficiaries while allowing someone to live there. The key differences are:
- A life interest trust gives the life tenant a recognised legal right in the property which may have value — it is a more substantial interest. A right of occupation is a purely personal permission to live there.
- A right of occupation offers trustees greater flexibility and control over the property — for example, it is easier for trustees to manage a sale or deal with the property if the occupier's circumstances change.
- A life interest trust is more commonly used for long-term arrangements, particularly in second relationship scenarios. A right of occupation is often more suitable for shorter-term or conditional arrangements.
The right approach depends on your specific circumstances, the nature of your relationship with the proposed occupier, and how much control you want the trustees to have. We recommend seeking independent legal advice if you are unsure which is more suitable.
Requirements for a Property Trust to Work
For a property trust in your will to be effective:
- The property must be owned as tenants in common — not joint tenants. If you own the property as joint tenants, a Notice of Severance must be served first to convert the ownership.
- You must name trustees to hold and manage the property. In most cases the same people act as both executors and trustees.
- You must name the life tenant or occupier clearly — their full name and relationship to you.
- You must name the final beneficiaries who will receive your share when the trust ends.
- You should specify the conditions under which the trust ends — for example, on the life tenant's death only, or earlier if they remarry, cohabit with a new partner or permanently leave the property.
If you have a mortgage on the property, you should speak to a financial advisor about appropriate life insurance cover. The mortgage lender's position is not affected by the trust — if there is an outstanding mortgage, the trustees and remaining owner remain liable for it.
What Can the Life Tenant Do With the Property?
Unless your will says otherwise, the life tenant can live in the property rent-free for the duration of their right. They cannot sell it, mortgage it or leave it in their own will. They cannot redirect your share to someone else through remarriage or any other means.
You can give trustees the power to sell the trust property and purchase a replacement property for the life tenant to occupy — this is useful if the life tenant wishes to move to a smaller home or a different area. You can also allow the property to be rented out if the life tenant consents or no longer wishes to live there, with the rental income passing to the life tenant if you choose.
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