How Will Your Home Be Transferred to Your Family Upon Your Passing?

Every first-time home buyer experiences a paper shock when they sit down at the Closing. The pile of documents requiring signatures is ridiculously large and overwhelming. The loan, title and transfer tax forms are all integral to the property purchase and impactful. One very important document signed at the Closing is the Deed. A deed lays out the ownership instructions and the description for a piece of real property. How a deed is titled may simplify or complicate estate planning.

A married couple purchasing a home will have both of their names on the deed as “Husband and Wife,” or as “Tenants by the Entirety.” This means that if one spouse should die then the survivor will inherit the other’s interest in the property by “operation of law.” No Probate proceeding will be necessary, the surviving spouse directly obtains full ownership of the property under the deed. Even if the married couple’s interest on the deed is not specified, New York law will still classify their ownership as a Tenancy by the Entirety. Non-spouse co-owners of real estate may title a deed as “Joint Tenants with Rights of Survivorship,” or “JTWROS” which will also grant direct full ownership to the surviving co-owner without Probate.

Where things get tricky is when a deed is silent as to the ownership interest of property between non-spouses or a combination of ownership groups. For example, a deed that lists four names, none of whom are married, without any other titling description would create a Tenancy in Common between all the parties. If an owner dies, then their share of the property falls into their estate and does not automatically pass to the remaining owners. Practically speaking, if three of the four owners die and the survivor wants to sell the home, they would need estates to be opened for the deceased owners which may be complicated and expensive. For the more advanced legal problem solvers: Sometimes two sets of married couples share ownership of vacation property. The titling may be defined as a Tenancy by the Entirety for the individual couples and a Tenancy in Common between both couples.

Life Estate deeds are options to provide for basic estate planning and asset protection when parents want to leave their property to a child but maintain some control and the right to reside in the home. The parents would retain a life estate and upon their passing, their interest would flow without Probate directly to the children who are called remaindermen. Solely owned property without a life estate would be subject to an estate proceeding (whether Probate with a Will or Administration if no Will) when the owner passes away.

Deeds can also be transferred and owned by Trusts. Traditional titling of deeds has limitations imposed by space and procedural restrictions. Trusts can offer greater control and provide for more complete planning instructions for a piece of real estate while avoiding the time and expense of Probate. Trusts can also limit exposure by maintaining fiduciary control as compared to the exposure placed on named individuals on a deed. Plus, compared to the physical signing demands of a Closing, a Trust signing with a deed transfer is a relative breeze.

Contact the professionals at Sloan and Feller for more information on planning and protecting your home.