One of the most important things your estate plan can do is to provide for the transfer of your assets after your death. For some estate plans, this can be achieved through a will. For others, a more elaborate plan involving trusts and other tools may be necessary.
As anyone who has bought or sold a home can attest, transferring real estate always carries a lot of legal requirements and formalities. This is especially true for cases in which real estate is transferred upon a person’s death.
For many people, a home represents the single most valuable asset in the estate, and so their estate plan should take particular care in the home’s transfer.
The first thing to know is that upon a person’s death, all their assets and debts become known as their estate. The legal process for settling their estate and transferring the assets to the heirs is known as probate.
Probate isn’t necessarily a bad thing, but in some cases, it takes time and costs money. That money comes out of the estate, meaning there’s less to distribute to the heirs. The time commitment of probate can be particularly hard for families when dealing with a home, as ownership may be unclear until the estate is settled.
Because of these issues, it may be a bad idea to transfer your real estate simply by making a bequest in your will.
With these downsides in mind, many people try to find ways to transfer property outside of the probate process.
One strategy involves making sure the real estate never becomes part of your estate. For instance, if you own your home in joint tenancy with your spouse or another relative, the home becomes solely their property upon your death. Thus, it is not part of your estate and doesn’t have to go through probate.
Another tactic involves placing the real estate in a trust. When you put property in a trust, it is technically no longer yours, and the trust can continue on after your death. Therefore, any property in the trust is not counted as part of your estate.
As we noted above, there are always a lot of requirements and formalities involved in any transfer of property. The same holds true for both of these estate planning-based strategies, and they should be attempted only with the help of experienced professionals.