Life Interest and other tenants

[Redzer]

I'm in the process of helping an 80 year old lady update her Will. She has a €300k home, a €250k rental property and approx. €60k in cash that she wants to divide between her 6 adult sons. 3 live in Ireland and 3 live abroad. She intends that her home (where she currently lives alone) would be sold and the proceeds and her cash would be divided equally between her sons giving them each approx. €60k cash. However she wants to do something bespoke with the rental property which is located near a University and has good rental options.

She is particularly concerned about one of her sons (call him 'John') who is not good at managing himself or money, and fears that he could become homeless at any stage. John is single, working a manual job for low wages through a temp agency and renting in another Irish city where he shares a house. He is 50 and starting to struggle with back issues which limits his job options. She wants to give John a Life Interest in the rental property so that he will always have the option of a roof over his head. However she does not trust him to manage the maintenance of the house, pay home insurance, LPT, utilities, etc. The rental property is a 4 bed semi. The lady intends that John would receive the rent for one of those rooms if he was not availing of his interest (i.e. he stayed working and renting in the other city). She will leave the ownership of that rental property equally between the other 5 sons and intends that they rent it out and manage those costs and issues. Realistically it will probably fall to one of the sons to manage this. They would share any residual rent between themselves equally.

She's hoping that if John was to take up residence in the rental property, that he will not drive other tenants away by his behavior as he's sometimes hard to live with. She also has a notion that the property could be used by any of the other sons coming back from abroad as the family home would be gone.

Any thoughts on such an arrangement?

 

[DannyBoyD]

Any thoughts on such an arrangement?

You can't micro manage what will happen after your death.

Either leave the property to John or direct that it will be sold.

John is clearly able to manage his life (working, paying rent etc.,) even if parent feels they don't manage well, that's really out of their hands at this stage.

 

[Redzer]

Fair comment and I agree but she's a micro manager now while she's updating the will and this is what she wants to do.

Ensuring that there's ALWAYS a roof over John's head is her primary concern so a Life Interest is her way of ensuring that. She's afraid that he could sell the house, drink the proceeds and end up destitute. It may not be a rational fear but it makes her anxious and this is her way of doing what she can to avoid that. John has some history of not being able to manage his life well (periods of not working, sleeping in his car, missing rent/car tax etc.) so there is a valid concern.

The question is more around the notion and practicalities of renting out the house with a Life Interest. Maybe its for a different forum?
Also just thinking if John was to apply for Social Housing would any future inheritance put that at risk?

 

[DannyBoyD]

John has some history of not being able to manage his life well (periods of not working, sleeping in his car, missing rent/car tax etc.) so there is a valid concern.

Indeed - but he is still an adult and is allowed make his own choices, even if we don't agree with them.

At the very least can you make sure good legal advice is obtained.

 

[ClubMan]

Ensuring that there's ALWAYS a roof over John's head is her primary concern

The mother of a friend of mine did this sort of thing and years later it's still causing problems for and conflict within the family (of 10 siblings) and created no end of problems for the ones who had to act as executors.

 

[TomEdison]

she's updating the will and this is what she wants to do.

I'm in the process of helping an 80 year old lady update her Will.

You can best help her by advising her strongly not to do this.

DannyboyD has it. You cannot micromanage events or behaviour after your death and any attempt to do so usually ends badly, and costs your heirs a lot of lost money.

She wants to give John a Life Interest in the rental property so that he will always have the option of a roof over his head . . .The lady intends that John would receive the rent for one of those rooms if he was not availing of his interest (i.e. he stayed working and renting in the other city).

The rent for one of those rooms? Is she trying to dictate that, if let out, the house must be rented out room by room, and not as an entire dwelling? Why? And what happens to the rest of rent — divided six ways between the six kids, or five ways between the five kids who aren't John?

Seriously, she needs to be realistic about how much she can foresee and control future events, and you need to help her be realistic. I sugest that the most she should do is leave the house to the six kids, subject to a right of residence for John. She can express a non-binding wish that if John does not exercise his right of residence then the house should be let out and that she would like the other family members to give John a 25% share of the net rent to assist him with housing himself elsewhere. She needs to understand, though, that if the six kids all agree that the house should be sold and the proceeds divided, then they can do that. She needs to trust her kids to make decisions that take account of the (ever-changing) circumstances and that will balance John's need for housing with fairness to the wider family. Her non-binding wishes indicate how she thinks this might be done, but she shouldn't try to force people for what might be many decades to operate arrangements that might turn out not to meed anyone's needs.

The bottom line is that the six kids, being adults, can all agree to override the will and e.g. sell the house and divvy up the resulting cash. The more she tries to micromanage them into inflexible arrangements the more likely it is that she will do that.

 

[Redzer]

The rent for one of those rooms? Is she trying to dictate that, if let out, the house must be rented out room by room, and not as an entire dwelling? Why? And what happens to the rest of rent — divided six ways between the six kids, or five ways between the five kids who aren't John?

The rental situation for several years has involved (rightly or wrongly) the house being rented out room by room and not as an entire dwelling. Its generally let to post-grad students on different timelines as they were probably more responsible tenants then undergrads. She is reluctant to rent the entire dwelling especially to a family in case they didn't pay and wouldn't move out. Her theory for John was that he'd get a quarter (as its a four bedroom house) of the net rent if he wasn't living there as a contribution to his rent elsewhere. The remaining rent would be divided between the other five sons as some form of benefit of owning the house but not being able to sell it while John had the Life Interest.

I sugest that the most she should do is leave the house to the six kids, subject to a right of residence for John. She can express a non-binding wish that if John does not exercise his right of residence then the house should be let out and that she would like the other family members to give John a 25% share of the net rent to assist him with housing himself elsewhere.

That could work.