Real Estate: Keeping property out of probate
Often, probate is something that should be avoided. First, it is an expensive endeavor, and every penny spent on probate is a penny not distributed to your heirs. Second, it can take a very long time, tying up assets for many months or even several years. During this time assets are inaccessible, a burden to upkeep, and often their future is unknown until the process is done.
Real estate is no different
While a house or cabin may be destined for sale, probate can delay that process for quite some time. If a house is to go to an heir, then the administrator of the estate will need to go to court to be granted legal authority to access the property. This can take weeks or months. So, in many cases, it makes sense to keep real estate out of probate.
But how exactly is real property kept out of probate? There are several ways, each of which has its pros and cons depending on the situation:
Title the Property as Joint Tenants. For a house to pass to a spouse, this is often the easiest way to transfer property. Once one spouse dies, the surviving spouse takes the property as a whole.
Record Transfer on Death Deed. Here, if one spouse owns the property, they can execute a transfer on death deed (TODD). This means exactly as it sounds: when the owner dies, the property immediately transfers to the named beneficiary. Since the TODD is a continuation of a deed, the property avoids probate.
Convey Property During the Owner's Lifetime. A common practice is to transfer a property to a revocable trust. This will take the property out of the estate and allow it to pass probate-free to the beneficiaries of the trust.
Title the Property in a Business Entity. This is regularly done for rental properties for both financial and liability reasons. Putting a rental property in a LLC will keep the property out of probate. Just be sure to create a business succession plan for the LLC for when the owner passes.
Takeaway
There are many different strategies that can be employed to manage real estate. Doing things properly can avoid headaches for your surviving family and friends. If you have questions about how to keep your real property out of probate, please contact Signature Law for a free consultation.