During a family day trip to Salem, Massachusetts we toured The House of the Seven Gables, made famous by Nathaniel Hawthorne’s 1851 novel. Built in 1668, the home’s place in literary and architectural history was patiently explained by the tour guide during our visit. A secret staircase, parlors galore, and tales of family intrigue were highlights to be sure. One room in the mansion had a wall of historical images for tour-goers to absorb. A single document featured on that wall caught my eye. It was a document that was instantly familiar, a legal sized paper which would be at home in any file currently in my office. I snapped a photo. That paper was a real property deed from 1749. The template, language, description and format of a document prepared 273 years ago matched deeds that we drafted this morning.
If there is a lesson that can be derived from a snapshot of a colonial document it is that the law operates on a timeline often unaffected by modernity or efficiency. A home is usually among the top 3 most valuable assets that a person owns. Keeping your ownership of that home tethered to an ancient document with significant limitations is not ideal.
Deeds list owners – former owners, current owners and the type of ownership each owner possesses. Some deed ownership combinations allow for a surviving co-owner to inherit the deceased co-owner’s or life tenant’s interest directly without probate. The remaining sole owner’s share would be a probate asset involving court intervention if their name remained the only name on the deed at the time of their death. In a Medicaid situation, an estate recovery action could be brought against the estate and the value of the home includable in that estate. Creditors of the decedent could also file against the estate and their claim could impact the home as an estate asset.
Placing your home in Trust, whether revocable or irrevocable, is one way to avoid probate, especially if the rest of your assets have beneficiaries or joint account holders. Trusts can include specific instructions on how you want the home to be managed, shared, rented and ultimately sold. Trust beneficiary combinations with contingency planning offer more complete instructions than a deed’s language. Irrevocable Trusts offer creditor and Medicaid protections for a home placed within while still allowing for STAR tax exemptions.
The use of Trusts also reflects complex relationships, second marriages and blended families. A deed that automatically transfers a deceased spouse’s share of a home to the surviving spouse affords the surviving spouse an opportunity to transfer the home to anyone according to their discretion. In a blended family situation – the deceased spouse’s children could conceivably be left out. Trusts mitigate that issue. A home placed in trust can allow for a surviving spouse to remain in the home for the rest of their life and then that property could be sold and the proceeds shared by all the children.
Deeds are not going away anytime soon (a deed is still required to transfer ownership to a trust). Adaptability, though, is a major component of estate planning. Long term care issues and family issues are present day realities. Just because something was done the same way for 273 years does not mean that we cannot take advantage of other tools which will give us better results. Contact the professionals at Sloan and Feller today for more information.