Eventually We All Die — Don’t Make The Inheritance Of Your Home A Mess!
No one likes thinking about it, but someday we are all going to pass away. When we do pass on we leave items behind. If you have a home or land, things can get complicated (even if you have a will). There are, however, a few ways to simplify things before the inevitable.
Why a simple will might not cut it:
Let’s say you leave behind two kids, and a three-bedroom house. You had a will, or maybe you didn’t. Frankly, it doesn’t really matter. As your heirs, the kids will have to wait until after the property passes through probate court until they legally own your home (which usually takes months and can be very expensive). Furthermore, anything that passes through probate is subject to taxes, which can be hefty when you’re talking about property worth hundreds of thousands of dollars. It’s not a fun, fast, or cheap process.
There are, however, 3 ways to avoid the long court ordeal of Probate, and even avoid the transfer taxes:
Tenancy by the entirety
If you’re married and own property together, you don’t have to do much to ensure your home is passed on to your spouse. If both spouses have their name on a deed, most states recognize what’s called tenancy by the entirety. Under this legal doctrine, when one spouse dies, everything he or she owns simply passes to the other spouse. No probate, no taxes, no title transfers… ownership automatically passes to the other person
But let’s say you’re not married, or you want to pass your property on to some other relative. You should prepare by transferring part of your interest to that other person to create a joint tenancy. It’s basically the same as tenancy by the entirety, but you don’t have to be legally married. Again, no probate, no taxes, no title transfers… ownership automatically passes to the other person
For many people, though, there’s a downside: What if you don’t want the other party to be able to control the property during your lifetime? To get around that, you can always create a living trust.
Putting property in trust means that you’re letting someone else (the trustee) hold it for the benefit of another person (the beneficiary). But when you create a living trust, you can act as the trustee of the property as well, choosing to pass it on to another person only when you die. You can even change your mind down the road and name a different beneficiary.
The actual living trust document can get a little complicated, so it should be drafted by an attorney. The good news? This transfer is usually tax-free. You can name a trust anything you want. So even though the deed to the property is publicly recorded, it’s hard to determine who the exact beneficiary is. This anonymity is one of the biggest benefits of a living trust. They also keep the property out of probate, provide for ease of transfer, and keep con men and hackers from coming after the beneficiary.
Whichever way you choose, the time to prepare is now!
Let’s be realistic… we are all going to die…and it’s going to suck for everyone who loved us. But we can make it suck just a little bit less by setting up an estate plan for our heirs. So save your loved ones a load of hassle and money…get started now. They’ll remember you much more fondly for it.
By Joseph Schutz
Ft Lauderdale, FL