When it comes to estate planning, many have discovered the benefits of keeping as many assets as possible out of probate's reach. Probate will almost always be necessary, but not everything the deceased owns has to be probated. When you keep an asset out of probate, it generally means a smoother and quicker way to deal with your property.
To find out more about just one of the ways you can keep property out of probate and benefit your beneficiaries, read on.
Real Estate and Probate
For most people, the bulk of what they own is tied up in their real estate holdings. At the least, that can include the family home along with any vacation or rental properties. When someone passes away, the real estate automatically passes to anyone named on the deed. If there are no surviving property owners, it passes to whoever is named in the will.
Probate rules differ from state to state, but having to probate property can take a lot of time and may be unnecessarily complicated. For example, in some states, the property cannot be sold without having two professional appraisals performed. With appraisals costing several hundred dollars a piece, that may be an unnecessary expense.
Life Estate Deeds
Rather than have the real estate go through probate, some are creating a way to have the home pass seamlessly to whoever they wish after their death. This is known as a life estate deed and is as easy to accomplish as making out a new deed at the county clerk's office. If the deceased is married at the time of the death, the validity of a life estate deed varies. If the deceased is not married, the deed can be altered by adding on one or more names.
What to Know About Life Estate Deeds
- In most cases, the person you add to the deed must be an adult.
- The owner of the home, who is called the life tenant on the deed, retains the right to live in the home until they die.
- Whoever else is named on the deed, called the remainderman, only takes full ownership of the home when the life tenant passes away.
- If the life tenant wishes to sell the home before they die, they have to have the permission of the remainderman.
- In some cases, the financial affairs of the remainderman can negatively affect the property. For example, if one of the remaindermen declares Chapter 7 bankruptcy, their portion of the home could be considered for seizure by the bankruptcy trustee.
To find out how this type of deed could help make things easier, speak to an estate planning attorney.