Leaving the home to the family is a lovely gesture that can establish a long-time legacy. Generations who share memories of a home are not that common today, making this a special act.
Memories of growing up in a home are part of many American childhoods. However, the family home usually disappears after the children grow up and parents move on to the next phase of their lives. To keep a home in the family takes a fair amount of planning. If that’s something you want to do, advises the day in a recent article, “Planning to leave your home to your heirs,” you’ll need to sit down with an estate planning attorney, as soon as that decision has been made.
Another reason to expedite your estate plan: unexpected and tragic things happen. Without an estate plan, you may not have the guardian for your children who you would want. There may not be sufficient funds for your children’s education. The cost of settling an estate without a will takes a long time, and incurs costs that would not be an issue with an estate plan.
Real estate is frequently given to an adult child, grandchild, or is divided among several heirs. Once you know who will receive the property, discuss your plans with these people to keep them apprised of your plans and avoid any unpleasant surprises. If you include your home in the will, you can stipulate precisely who should benefit from it. You can also say if you want the home to stay in the family or be sold.
Dividing the interest in a property evenly among beneficiaries might seem fair, but it can also create some unexpected complications. If one beneficiary wants to move into the home and another wants to sell it and split the proceeds, things could get dicey. Discuss this issue with your beneficiaries to resolve this potential conflict in advance. One beneficiary could buy out the other beneficiaries' shares in the property to take sole possession of it. However, you may need a life insurance policy to be sure that the cash is there for a buyout.
A will is also used to delegate responsibilities to certain heirs. You select an executor to oversee the disposition of your estate after your death.
An outstanding mortgage balance can cause some trouble, when passing on a property. Any debts you have at the time of your death, need to be paid before your estate can be settled. If you were still making mortgage payments, be sure your beneficiaries have a plan to avoid a default. Beneficiaries, a surviving spouse, the executor of estate, or any other party can continue to make payments to your bank to avoid a foreclosure process. There are several ways that your beneficiaries can resolve a mortgage, after they take possession of the home. In addition to just selling the property, they can refinance the loan or pay off the mortgage with any assets they have or receive from your estate. That way, they would own the home free and clear.
Review your will regularly to keep it up to date. Make a change if a beneficiary dies, if your own circumstances change, or if your relationship with an heir goes bad.
You can also transfer your home to a living trust. This lets you use and benefit from the asset while living and then transfer it to beneficiaries upon death. This will avoid the probate process and save heirs time and money. The trust document identifies beneficiaries and determines how the estate will be distributed after death. It can also name a trustee to oversee this process and avoid conflict among beneficiaries.
One downside of a living trust is that any outstanding debts must be taken care of before the home and any other assets in the trust can be transferred to beneficiaries.
Another option, if the family is comfortable with it, would be to update the deed of the house to include one of the beneficiaries. If your spouse is not on the deed, this will make the transfer of the house less complicated. In fact, if the deed is titled “transfer on death,” then you own the home outright, until you die. At that point, it passes to any beneficiaries named in the deed.
Similarly, when the deed reads “joint tenant with right of survivorship,” at your death, ownership of the home automatically transfers to any co-owners on the deed.
Talk with your estate planning attorney about your situation and the best way to make this happen. This is a good example of when a family meeting can bring a clear understanding of what the future holds to avoid any misunderstandings.
Reference: the day (February 15, 2019) “Planning to leave your home to your heirs”