Many people plan for the transfer of assets to their loved ones when they die but fail to plan for one of the most important assets of all: real estate.
A common misunderstanding is that a person's interest in real estate automatically transfers to a surviving spouse. That is not necessarily the case. After death, property needs to be properly transferred to the person who is entitled to have it.
There are many things you can do now through estate planning to make the transfer of property easier, faster and less costly for your loved ones. Here are a few examples:
- Place the property in a limited liability corporation or family limited partnership
- Place the property in a trust
- Own the property in joint tenancy with rights of survivorship (JTWROS)
To avoid unintended consequences, it's important to review all of your property with an attorney who understands both real estate law and estate planning. For example, if you and your spouse are young and healthy, owning property in joint tenancy with rights of survivorship may make perfect sense. However, the same estate plan that worked for you when you were young may work as planned when you are older.
Suppose your spouse is in a nursing home when you die. In that case, your interest in the property may end up going to pay nursing home expenses. When you are older, it may make more sense to pass your interest in real estate to your children.