Passing your home to your heirs can occur in a number of ways, depending upon your situation and your family. It’s not a do-it-yourself project—even in the simplest cases.
If you own a home and want to leave it to your loved ones, there are steps you need to take to ensure that your wishes are achieved. According to Fox News, “You're Going to Die—Here Are the Best Ways to Deal with Your Home,”, inheriting a collection of 80s Transformers action figures won’t have a big impact on your heirs, but a sizable asset like a house will.
Here are a few ways to help prepare now.
If you have a couple of kids and a house, as your heirs, the kids will have to wait until after the property passes through probate court. This can take months and can be expensive. Taxes may be levied as well, which can be substantial on a modest home. Once that's done, the kids are then able to take title to the house or sell it; however, there are ways to avoid—or at least minimize—these problems.
- Tenancy by the entirety. If you're married and own property together, there’s typically not much you need to do to make certain your home is passed on to your spouse. If both spouses have their names on a deed, most states recognize tenancy by the entirety, which says that when one spouse dies, everything he or she owns goes to the other spouse. That's it. No probate at the first death.
- Joint tenancy. If you're not married or if you want to pass your property to some other relative, you should prepare by transferring part of your interest to that other person to create a joint tenancy. This is nearly identical to tenancy by the entirety, but there is no wedding ring involved. These are the easiest ways to transfer title, but there are downsides. Remember, the other person now owns your property as well. You have now exposed the property to outside control and to the lawsuits, creditors, divorces and other issues of another party. Yes, your property could be lost due to the financial troubles of the person whose name you just added to the title. The better answer may be to create a living trust.
- Living trusts. If you place property in trust, it means that you’re letting someone else—the trustee—take care of it for the benefit of another person—the beneficiary. However, with a living trust, you can act as the trustee of the property yourself and can elect to pass it on to another person only when you die. You can also change your mind and name a different beneficiary. Trust language can be complicated. This is definitely not a do-it-yourself project. Generally speaking, a living trust will avoid probate, and the transfer is usually smooth and seamless.
- Land trusts (if valid in your state). Like living trusts, land trusts have the same anonymity and ease of transfer. They also require a setup fee and an annual fee on top of that—though typically this fee is less than $100. Unlike a living trust that can hold all sorts of assets, a land trust can hold only one thing: land. A living trust offers a lot more flexibility. In light of this, land trusts are usually set up when someone wants only to pass down real property or as part of a more complex estate planning strategy.
If you own a home or other real estate property, planning in advance with an experienced estate planning attorney can make settling your affairs easier for those you leave behind.
Reference: Fox News (July 22, 2016) “You're Going to Die—Here Are the Best Ways to Deal with Your Home”