For most of us, our home is the most valuable and significant asset we will ever own. A key aspect of estate planning is deciding how you want ownership of your home handled in the event of your death or incapacity. Your needs and concerns might be quite different as time passes. For example, if you have minor children, there are special considerations you might not be concerned with if your children are independent and grown and you are approaching retirement.
Below is a basic outline of the options available to make sure this asset is handled according to your wishes in the event of your death or incapacity. The right solution for each individual or family is a very personal one based on consideration of numerous factors. Call us at (720) 358-4768 today to discuss your needs.
Estate Planning Options for Homeowners
If you own your home in joint title with your spouse, in most cases, your home will pass to your surviving spouse entirely upon the event of your death.
If you are the sole owner, no one is able to sell the property without instituting Probate proceedings to be appointed as your Personal Representative (legal representative in charge of your Estate). This process will delay the sale of your home and can be complicated.
If, however, you do not die but are incapacitated (unable to make decisions and execute legal documents) due to injury or disease (Alzheimer’s, dementia, stroke, etc…), no one is able to sell the property or alter your ownership interest without instituting legal proceedings to be appointed as your Conservator (legal representative in charge of your financial affairs while you are still alive). These proceedings can be costly and time-consuming.
ADD SOMEONE TO THE TITLE
If you are the sole owner of your home, you have the option of adding someone as a joint title holder. The joint title holder, in most cases, becomes the sole owner of the home upon your death. Many elderly homeowners consider adding one of their children to the title.
This option has several consequences to consider. If you intend for your home to be sold and the proceeds divided among several children, there is no guarantee that the single title holder will do as you wish. They become the sole owner of the property upon your death, without limitation.
Additionally, there can be significant tax consequences both at the time of adding someone to the title and upon sale after your death. You should consult with a tax professional prior to electing this option.
In Colorado, we have something called a Beneficiary Deed. This type of deed is registered at the time it is created but nothing happens until you die. Once you have died, the beneficiary deed names the person(s) you wish to take title to your property.
There are some limitations to consider. If you become eligible for Medicaid assistance (or need it), this deed will have to be cancelled before you can receive Medicaid benefits. Also, most title companies will not process a sale of property under a Beneficiary Deed until 120 days after your death. This can be a costly delay.
A Will can be used to transfer ownership of your home or instruct your Personal Representative to do something with your home (like sell it or place it into a Trust to be used as rental property).
A Will requires your Personal Representative to initiate Probate proceedings in Court. Your Personal Representative is not empowered to control your assets until the Court issues Letters Testamentary authorizing them to do so. These proceedings can be complicated and time-consuming.
A Trust can be used to control ownership of your home. There are two relevant types of Trusts to consider. A Testamentary Trust is created at the time of your death, most often by provisions within your Will. As mentioned above, this type of Trust can be used to maintain your home as a rental property after your death.
The other type of Trust to consider is a Living Trust. A Living Trust is created while you are still alive. This type of Trust would take ownership of your home while you are still living. You would be named as the Trustee and Beneficiary of this Trust. You do not give up any rights to your home while you are alive and well.
In the event of your incapacity, a Living Trust can name a Successor Trustee – a person who takes over managing the Trust property. This prevents the need for Conservatorship proceedings mentioned above.
At the time of your death, the Living Trust can also name a Successor Trustee (many times this is the same person named in the event of incapacity). The Successor Trustee is empowered to take over managing the Trust property right away. Your Successor Trustee can sell your home right away (if you so desire) or can manage the property for the benefit of others according to your wishes. No Court involvement is required.
If you want to know more about these options, RSVP to attend our seminar on Estate Planning for Homeowners. You can sign up on the Events page or call us at (720) 358-4768.
If you would like to discuss the specifics of your situation, schedule your free consultation here or by calling us at (720) 358-4768.