When someone passes on, whether it is expected or not, it can be a difficult and emotional time for their loved ones. Sometimes, the last thing you want to think about is what will become of their property and who is entitled to it. Family members often share a home with grandparents, aunts, uncles, or other relatives as well who may share a home they own the title to, and then pass on their estate to their heirs. Whatever the situation, it can be a difficult time for all involved, but there are laws that help determine the rightful heirs and a process for how to determine who gets your real estate when a family member passes. The process to determine this is called Estate Administration, and we’ll explain everything you need to know to plan ahead for your own real estate, and what to do when you are faced with a home with no estate plan.
Estate Planning Steps to Protect Your Family Members Now
First things first: your best bet for making the probate process easy for your family members is to plan your estate before your death. This is the legal process of designating a beneficiary who will receive your estate assets and handle your will after your death or incapacitation. This might be one of your children or a family member, a close friend, or a probate attorney. Many people might not think they have enough property to justify a will, but if you are a homeowner or property owner, you do. Real estate is an asset that people will have to address after you die, and a will provides the guidance they need to make this as easy as possible. The goal of an estate is to ensure beneficiaries receive assets in a way that does not burden them with estate tax, gift tax, income tax or other taxes. The main question to ask yourself when estate planning is “how do you want your assets distributed?” The first step in the process is to take inventory of these assets and their values. Potential estate assets to consider are:
- Homes, land, and other real estate
- Vehicles (cars, motorcycles, boats, etc.)
- Collectibles (art, instruments, antiques, coins, trading cards, etc.)
- Other personal possessions
- Ownership in a business
- Bank accounts (Checking, savings, etc.)
- Investments (stocks, bonds, mutual funds, etc.)
- Life insurance policies
- Health savings accounts
- Retirement plans (workplace 401(k) plans and individual retirement accounts)
For items that you are unsure of the value of, an appraisal or other documentation from financial institutions will be necessary. Take steps to determine this value when writing your will.
Next, evaluate your family’s needs to determine who should get which assets, if your children need a guardian, who the executor should be, and what your children’s wishes are. Make sure you record their contact information so that the executor can easily find them.
A trust might be a good choice. A living trust allows you to designate portions of your estate while you are alive, and a trustee is appointed to take over after your death. This bypasses the probate court, who would otherwise distribute your property, and the trust assets go straight to the beneficiaries.
Reviewing your beneficiaries periodically is important. Make sure that any new accounts are designated, and that each beneficiary reflects your wishes. For instance, many people forget to update their will to remove an ex-spouse or add a new spouse.
If your estate is small, attorneys might not be necessary. There are even ways to write your will yourself online. However, if you have any doubts, an estate or probate attorney is necessary for ensuring you don’t leave anyone or anything out.
Different Types of Home Ownership
Now, what do you do when you are faced with real estate after the owners death with no estate plan? First, we need to discuss some types of home ownership and how they can affect the process. The most common and simple form of ownership applies to a married couple. A Tenancy in the Entirety means that both spouses own the home together and if one passes on, the the surviving spouse continues to own the property as a single owner. While both spouses live and own the home together, neither can sell the property without permission from the other, except in case of divorce proceedings that determine ownership to that spouse, or in case of death of one spouse. Some states are considered community property states, where all assets in a marriage are considered “community property” and owned 50/50 by both spouses. Be sure you understand your state law, and plan accordingly.
A joint tenancy is very similar, but covers couples who are not married or joint owners of a home that cohabitate. This is handled in the same way, where if one member of this partnership dies, the other becomes the sole owner of the home. In this case, one cannot sell the property without the other’s consent while they are living. This is also called Right of Survivorship.
A Tenancy in Common is entirely different. There is no right of survivorship in this scenario. Instead, if one member of the partnership dies, their family would be entitled to the house as accounted for in the deceased person’s will. The members in the ownership of the home don’t have to own equally in this scenario, and either owner can sell their stake in the property at any time. This is similar to a sole ownership scenario.
Sole ownership is as simple as it sounds, where a single individual is the sole owner of the house or property. They are allowed to do as they wish with it at any time and can leave the property to whomever they wish in their will. Probate will often be necessary in order to transfer the estate assets. Depending on how the ownership is held, the process may or may not need to go through a court supervised process called Probate.
Probate is a process in court that the future owner must go through in order to have the property rights passed on to them from their deceased family or friend. It is the only way to get the title placed in the name of the new owner. This applies when dealing with sole ownership of a property or when an individual did not leave behind a will. It can also apply in cases of a property owned jointly but that did not have Right of Survivorship. Non-Probate assets don’t have to go through the probate court, because there is already a mechanism in place for the transfer of the property. For example, properties covered by Right of Survivorship would be considered non probate assets.
If there is still a mortgage left from the deceased’s home or property, there is a surprising process that occurs. This is where we usually see a foreclosure on the house if the person didn’t finish paying their mortgage. The remaining family will not be required to pay off the remaining balance of your real estate debts, and because of this, the bank will foreclose on the property. If the family would like to keep the home in the family, so to speak, then they can opt in to pay the remaining mortgage and keep the property. State law differs in each state for how this is handled, but in any case, it leaves the choices up to the surviving person, which is better than leaving it up to the bank or lender alone. If there was a co-signer or second owner on the loan or mortgage, then they will be held responsible for the remaining balance of the estate debts.
If a Parent Dies and Leaves Real Estate to a Child or Loved One
This is a difficult and emotional scenario for anyone, but it is always best to discuss these assets ahead of time so that a young person can be prepared and educated on what they should do in case a parent dies and they become a homeowner. This is usually the preferred scenario, but preferably when the children are older and able to take on the home themselves. This can be discussed ahead of time as a long-term plan of passing the home on through the family to make sure the property doesn’t change hands, or it can happen naturally, as a result of being left to surviving children in the will. It is highly recommended to discuss these and other concerns while you plan out your will with an executor who can then be the person to distribute your estate to the rightful heirs after your death. These can be difficult topics to discuss, but it is very important to be prepared as you enter into middle age.
If The Person Has No Will
Many people die without ever considering a will, but this can cause all kinds of frustration and financial issues for your family while they are already grieving. It is very important to hire an attorney as an executor and set up your will, so that your children or beneficiary can be taken care of in the event of your death. Having a good attorney client relationship established before you die can ensure they are a person you can trust to guide your children and family through your estate after your death. Give your family your attorney contact information, so they are not lost on where to turn when you are gone.
While attorneys are the best way to make sure your will is solid, a Transfer-on-Death is a method that many states allow where you can fill out a form and have it notarized instead of an official will, in order to leave property to someone. This is an effective way of handling the situation, as well, just be sure to have it notarized and have the documents to prove it in the hands of the beneficiary.
If there is no will or Transfer-0n-Death, then things can become much more complicated, especially when dealing with real estate. State law will provide a list of possible executors for the property of the deceased. They usually start with the spouse if there was one, and then move down the list of family members. An executor is chosen, and they will then go by the laws of Intestate Succession. This is not the estate case anyone wants to inherit, and can mean a difficult journey through the probate process and probate courts while they should be devoting time and energy to their grief. To ensure you are providing the most you can for your surviving spouse and children, and to lessen their burden after you die, plan for your estate while you are still here.
Grief is hard enough for your children and family, but when the deceased person leaves their assets in a state that could cause conflict and a difficult journey haggling through probate court, this nightmare can last much longer and cause damage to the relationships within the surviving family. Make sure you plan ahead for your estate, and have a probate attorney you can trust on your side to make the process as smooth as possible for your children and family.