When you own real estate, that ownership could affect your estate planning in unexpected ways. The legal method by which you have title to the real estate matters, as does how you plan to distribute the property in your plan.
Joint Ownership of Property
If you own property with someone else, you must take that into account when you work on your estate plan. People most often own property with a spouse, as joint tenants with right of survivorship, or as tenants in common. In a joint tenancy with right of survivorship, when one tenant passes away, the other tenant gains full ownership of the property. Tenants in common each own a “piece” of the property. When one passes away, that portion of the property goes to his or her heirs. The other tenants retain their interests in the property.
Joint owners should take special care to include their real estate in their estate plans. For example, a tenant in common might specify that one of his or her children should inherit the tenancy. Otherwise, the tenancy could go to a spouse, several children, or a few different relatives, depending on the terms of the will.
Probate and Real Estate Ownership
Owning real estate may increase the chances that your estate will need to go through probate court. The probate court oversees distribution of the estate to your heirs. Real estate tends to be one of the larger-valued assets in most people’s estates. The higher value the estate, the more fees the estate will have to pay. Unfortunately, paying for fees associated with probate can decrease the overall value of your estate and reduce inheritances.
You do have some options that may keep your estate out of probate court. For instance, you can place your real estate in a trust, either now or upon your death. Provided that the trust is irrevocable at your death, it will fall outside of your taxable estate and thus not be subject to probate court supervision. Further, a joint tenancy passes property outside of probate court too. Once one of the joint tenants passes away, the property automatically belongs to the other tenant in full.
Other considerations for estate planning when you own property include estate and gift taxes, calculation of basis, and transferring mortgages along with the real estate. For more help factoring your real estate ownership into your estate plan, talk to a local estate planning attorney.
Want to start planning your estate? Local attorney Andrew Szocka, Esq. provides thorough and speedy estate planning help in the Chicagoland area. To schedule a free initial consultation, visit the Law Office of Andrew Szocka, P.C. online or call the office at (815) 455-8430.