Planning your estate can feel overwhelming, especially when you want to make sure your loved ones are looked after while also preserving your legacy. Two common tools we often discuss with clients are a Right to Reside and a Life Interest. While both allow someone to benefit from an asset—usually a home—they operate quite differently.
Understanding the key differences can help you make the best decision for your circumstances and ensure your wishes are properly carried out.
What Is a Right to Reside?
A Right to Reside grants someone—commonly a spouse or partner—the legal right to live in a particular property for a set period. This could last:
- For the rest of their life;
- Until they remarry or begin a new de facto relationship; or
- Until a specific event occurs (e.g. your youngest child turns 18).
Key features:
- The person can live in the home but cannot rent it out, sell it, or substitute it for another property.
- They’re typically not required to pay rent, but are usually responsible for rates, utilities, and general upkeep.
- Once the right ends, the property passes to the next beneficiary or beneficiaries—often the children.
What Is a Life Interest?
A Life Interest goes a step further. It gives someone—known as the life tenant—broader entitlements, such as:
- Living in the property for life;
- Renting it out and receiving the income; and
- In some cases, selling the property and using the proceeds to buy another home.
Key features:
- Offers greater flexibility than a Right to Reside.
- The life tenant may use or benefit from the property (or other assets) for their lifetime.
- When the life interest ends (usually on death), the remaining assets pass to the remainder beneficiaries.
Why Does the Distinction Matter?
The option you choose can significantly impact how your estate is managed and distributed. Here’s how they compare:
Use and Control
Right to Reside: Grants the right to occupy a specific property only.
Life Interest: Offers broader control, including the ability to rent out the property or, in some cases, sell and reinvest in another home.
Access to Income
Right to Reside: Offers accommodation only.
Life Interest: May provide access to income from the asset or from estate investments.
Flexibility
Right to Reside: More restrictive, suited to those who want to provide secure housing but retain control over the asset.
Life Interest: More flexible, especially where financial support for the beneficiary is a consideration.
Duration
- Both can last for the lifetime of the person.
- A Right to Reside can be conditional—for example, ending if the person moves into aged care, remarries, or no longer resides in the home.
When Might You Use These Options?
Your choice will depend on your specific goals and family circumstances.
A Right to Reside may be appropriate if you want your spouse or partner to remain in the home after your passing, while ultimately ensuring that the property (or its value) goes to your children.
It can also be useful when you want someone to benefit only while they remain living in the home.
A Life Interest may be more suitable if you’d like the person to benefit not just from living in the property, but also from any income it generates. The capital value of the asset would then pass to other beneficiaries after their death.
Final Thoughts
Deciding between a Right to Reside and a Life Interest is a personal choice—but one that can have lasting consequences for your loved ones. These options are not one-size-fits-all, and the right structure depends on your intentions and your family’s needs.
Getting tailored legal advice can ensure your Will reflects your wishes and protects those who matter most. If you’d like guidance on what best suits your situation, our team is here to help.
The information in this article is general in nature. For personalised advice, please contact our Wills & Estates team on (03) 9311 8911.
