Parents often want to make sure a particular family member always has a home, without giving them the property outright. Common reasons include:
- a second spouse who should be able to stay in the home, while the property ultimately goes to the will-maker’s children;
- an adult child who needs housing but should not own a property, perhaps because of debts, a difficult relationship or poor money management;
- a family member with a disability or ongoing care needs.
A Will can achieve this with a “right to reside” or a “life interest”.
Right to reside and life interest: the difference
A right to reside lets a person live in a property, usually for their lifetime or until a set event such as remarriage or moving to aged care. They cannot rent it out or sell it.
A life interest is broader. The person may live in the property or receive the income from it, for example by renting it out.
In both cases, ownership remains with the estate or a trust. When the right ends, the property passes to the people the will-maker chose, often the children.
Questions the Will must answer
Many disputes arise because the Will leaves these questions unanswered:
- Who pays rates, insurance, owners corporation fees and land tax?
- Who pays for repairs and major maintenance?
- Can the property be sold and a replacement home bought?
- Can others, such as a new partner, live there too?
- What happens if the person moves into aged care temporarily or permanently?
- When exactly does the right end?
Tax considerations
A right to reside affects tax, including capital gains tax when the property is eventually sold and land tax while it is held. The result can differ depending on whether the property was the will-maker’s own home or an investment property, and whether a trust holds it. These issues should be considered when the Will is drafted, not after death.
Is a testamentary trust better?
Sometimes the property is better placed in a testamentary trust, with trustees given clear powers to provide housing for the family member. This can offer more flexibility and protection, particularly where the person may face bankruptcy or relationship breakdown. Trusts must be drafted with the new trust tax rules from 2028 in mind.
How Chua Tan Associates can help
We draft Wills that provide housing for a spouse, child or other family member in a way that is clear, practical and fair to everyone. We advise in English, Mandarin and Cantonese.
Related reading
Chua Tan Associates acts for families, executors, trustees and their professional advisers in estate planning, estate administration and estate disputes in Australia and across borders. To arrange a confidential consultation, please contact our Melbourne office on +61 3 9602 3988 or submit an enquiry. Advice is available in English, Mandarin and Cantonese.
Justin Chua (蔡智勋), lawyer and mediator, Chua Tan Associates, Melbourne. General information only, not legal or tax advice. Victorian law unless stated otherwise.
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