Many parents who own their homes outright want to leave the property to their children (or maybe, just one child, depending on the circumstances). However, you probably want to avoid putting the house through probate court, in order to spare your heir from the delay and cost involved. What are your options? Consider these three.
Joint Tenancy With The Right Of Survivorship
You can add your child to the property as a joint owner with the right of survivorship. That makes you both owners of the property while your alive, but your interest in the property will automatically transfer to your child when you die.
There are several drawbacks to this procedure, however. Once you do it, you aren't the sole owner of the place. Should you change your mind and decide to sell the property, you can't do it without your child's permission. Your child also has an equal right to possession of the property -- which means that he or she can move in without your consent.
Other problems include the fact that your child could sell his or her share of the house without your permission. If he or she has financial problems, creditors can attach liens to the property on your child's share.
A life estate may make you more comfortable because it does eliminate some of the potential pitfalls caused by a shared tenancy. You actually transfer ownership of your home to your heir while you are still alive, which avoids probate, but reserve the exclusive right to live on and control the property until your death.
This negates a lot of problems, but could open the door to others, because they are virtually non-revokable Because you no longer own the property, you lose all say-so over what happens to that property once you die. That may not be a problem now, but if your heir dies before you or gets divorced that could mean knowing that the property is going to pass out of the family or get sold upon your death.
Transfer On Death Deeds
An increasing number of states are now allowing homeowners to use a transfer on death deed to avoid putting property through the probate court.
A transfer on death deed can resolve nearly all the potential pitfalls caused by the other deeds. You retain full ownership and control and the title passes seamlessly to your designated heir at the moment of your death. Should you change your mind and want to revoke the deed or sell the property, you can.
The only potential pitfalls are that any liens or other debts associated with the property (like unpaid taxes) also transfer to your heirs. That could cause a problem if they aren't in a financial position to handle the expense.
To discuss your options, contact a real estate attorney (such as one from Levin & Levin, LLP - Attorneys at Law).