Tenancy in Common

How Do I Transfer My Home into a Trust?

Say that a husband used his inheritance to purchase the family home outright. The wife signed a quitclaim deed to him to put the property into his living trust with the condition that if he died before his wife, she could live in the home until her death.

However, a common issue is that the husband or the creator of the trust never signed the living trust. So what would happen to the property if the husband were to die before the wife?

How do I transfer a home into my trust
Transferring your home into your trust isn’t a complicated matter as long as you know the pit-falls to lookout for.

This can be complicated if the couple lives out-of-state and it’s a second marriage for each of the spouses. They both also have adult children from prior marriages.

The Herald Tribune’s recent article, “Home ownership complications need guidance from estate planning attorney,” says that in this situation it’s important to know if the deed was to the husband personally or to his living trust. If the wife quitclaimed the home to her husband personally, he then owns her share of the home, subject to any marital interests she may still have in the home. However, if the wife quitclaimed the home to his living trust, and the trust was never created, the deed may be invalid. The wife may still own the husband’s interest in the home.

It’s common for a couple to own the home as joint tenants with rights of survivorship. This would have meant that if the wife died, her husband would own the entire property automatically. If he died, she’d own the entire home automatically. She then signed a quitclaim deed over to him or his trust.

First, the wife should see if the deed was even filed or recorded. If it wasn’t recorded or filed, she could simply destroy the document and keep the status of the title as it was. However, if the document was recorded and she transferred ownership to her husband, he would be the sole owner of the home, subject to her marital rights under state law.

If the trust doesn’t exist, her quitclaim deed transfer to an entity that doesn’t exist would create a situation, where she could claim that she still owned her interest in the home. However, the home may now be owned by the spouses as tenants in common, rather than joint tenants with rights of survivorship.

To complicate things further, if the husband now owns the home and the wife has marital rights in the home, upon his death, she may still be entitled to a share of the home under her husband’s will, if he has one, or by the laws of intestacy. However, the husband’s children would also own a share of his share of the home. At that point, the wife would co-own the home with his children.

You can see how crazy this can get. It’s best to seek the advice of a qualified estate planning attorney to guide you through the process and make sure that the proper documents get signed and filed or recorded.

Reference: The (Sarasota, FL) Herald Tribune (September 8, 2019) “Home ownership complications need guidance from estate planning attorney”

Your Will Isn’t the End of Your Estate Planning

Even if your financial life is pretty simple, you should have a will. And once you have a will, that’s not the end of your estate planning.  There’s still some work to be done to make sure your family isn’t left with an expensive mess to clean up.  Assets must be properly titled, so that assets are distributed as intended upon death.

Your Will is only one piece of your estate planning.

Forbes’ recent article, “For Estate Plan To Work As Intended, Assets Must Be Properly Titled” notes that with the exception of the choice of potential guardians for children, the most important function of a will is to make certain that the transfer of assets to beneficiaries is the way you intended.

However, not all assets are disposed of by a will—they pass to beneficiaries regardless of the intentions stated in the will. Your will only controls the disposition of assets that fall within your probated estate.

An example of when a designated beneficiary controls the disposition of a financial asset is life insurance. Other examples are retirement accounts, such as a 401(k) or an IRA. When there’s a named beneficiary, assets will be distributed accordingly, which may be different than the intentions stated in a will.

The title of real estate controls its disposition. When property is jointly owned, how it is titled determines if the decedent’s interest in the property passes to the surviving partner, becomes part of the decedent’s estate, or passes to a third party. Titling of jointly owned property can be complicated in community property states.

In the same light, a revocable trust is an inter vivos or living trust that’s created during the grantor’s life, as part of an estate plan.

Such a trust can be used to ensure privacy, avoid the expenses and delays in the probate process and provide for continuity of asset management. A critical part of the planning is that the grantor must transfer (or retitle) assets to the trust.

Wills are very important in estate planning. To ensure that your estate plan fulfills your intentions, talk to an estate planning attorney about the proper titling of your assets.

Reference: Forbes (May 20, 2019) “For Estate Plan To Work As Intended, Assets Must Be Properly Titled”

Pros and Cons of Joint Tenancy with Right of Survivorship

JTWROS gives owners an equal right to the asset, if one account holder dies.

Also known as JTWROS, this is used often by couples and business partners as a means of owning each other’s assets. There are some good reasons to do this, but there are also some drawbacks.

DeedUsed for bank accounts, real estate, personal property and even brokerage accounts, JTWROS gives owners an equal right to the asset, if one account holder dies. When that occurs, the other account owner, usually a business partner, spouse or a child, is immediately the owner of the money or property. There are advantages and disadvantages to this arrangement, as clarified in Investopedia’srecent article, “The Benefits And Pitfalls Of Joint Tenancy.”

ADVANTAGES

Avoiding Probate. When an individual dies, his or her will is reviewed by a probate court. The court decides if the will is valid and legally binding and determines what liabilities and assets the deceased may have left. Any remaining assets after all debts are settled, are then distributed to heirs. If the individual dies without a will, the laws of intestacy apply. The probate process can take weeks, months, or even years, to sort through the deceased's estate. It will take even longer for beneficiaries to receive their inheritance. However, with JTWROS, ownership automatically transfers to the other spouse or business partner upon the death of the first partner. There’s no probate.

Equal Responsibility. When a married couple or two business partners own an asset that is titled JTRWOS, both individuals are responsible for that asset. They both enjoy its benefits and share in the liabilities equally. It also means that neither party can incur a debt on the asset, without indebting themselves.

Continuity. When someone dies, his or her assets are often frozen until the probate court determines whether the assets are encumbered, or until a determination is made about how to distribute them to heirs. This can be a problem for a surviving spouse who has outstanding debt or expenses.  However, by owning an asset as a joint tenant, the surviving spouse or business partner may use the property in any way he or she sees fit. The law also states that immediately upon the death of one tenant, ownership is transferred to the survivor.

DISADVANTAGES

Deteriorating Relations. Two people who own the entire asset together can be a disadvantage in an unstable relationship. Neither party can sell or encumber the asset, without the other party's consent.

Frozen Bank Accounts. If the deceased is heavily in debt, and the probate court is concerned that the surviving spouse or business partner may liquidate the funds to avoid paying the obligations, the court could freeze the account. An account may also be frozen, if there is a question as to whether the surviving spouse or business partner actually contributed to the account, or if the ownership was merely for convenience. In some cases, the asset may still be frozen upon the death of either partner or spouse.

Partner Asset Control. When the surviving spouse or business partner assumes control over the joint asset upon the death of the co-tenant, he or she may then sell it, or bequeath it to someone else: the deceased loses control over the ultimate disposition of the asset entirely.

Alternatives. There are other ways to structure joint ownership. One is “tenancy in common,” which lets each party own one half, or a determined percentage or fraction of ownership. Each person has the right to sell their share without the other party’s approval or consent and the portion of ownership can be passed to heirs.

However, the ownership of the asset does not automatically transfer to the surviving account owner, when the first owner dies. It passes according to the deceased person’s will.

Assets can be accessed by other owners, if one person becomes disabled or dies. They can also sell a portion of the asset, without obtaining permission from a probate court.

Speak with an estate planning attorney before placing assets in JTWROS or tenancy in common to ensure that your assets work with your overall estate plan.

Reference: Investopedia(March 20, 2018) “The Benefits And Pitfalls Of Joint Tenancy”

Have It Your Way, With a Will

Without a will, decisions about your life, property and children will be made by someone who does not know you or your family.

Without a will, decisions about your life, property and children will be made by someone who does not know you or your family. With a will, you have the ability to express your wishes. You need a will!

MP900430490Having a will is not just for wealthy folks, who need to pass large amounts of money across generations. It is a legal document that protects you while you are living, protects minor children if you die and also distributes property after you pass. Less than half of all adults in America have an estate plan, according to a 2017 survey by Caring.com, and what’s worse, only 36% with children under the age of 18 have a will.

Inside Indiana Business’ recent article,“With a Will, It's Done Your Way,”explained that if you die without a will (i.e., intestate), the law of the state where you reside determines how your property will be distributed. For example, in Indiana, here’s what happens:

  • If you’re married, your spouse gets half of your assets and your children/grandchildren get the other half.
  • If you’re married without children, your spouse gets three-quarters of your assets, and your parents will receive one-quarter.
  • If you’re single, 100% of your assets go to your children.
  • If you’re single without children, your parents get one-quarter of your property and your siblings, nieces, and nephews will receive the rest.

The court will also appoint some individual to take care of your children. That’s known as a guardian, and it’s usually a family member. While that may sound OK, a judge’s criteria may not be the same as yours. It’s better if you decide which family member or perhaps skip your family altogether and choose a friend to serve as guardian. Without a will, you give up your right to choose.

Talk to an experienced estate attorney who can prepare your will to be certain that your wishes are clearly articulated and minimize the potential for others to contest the terms.

An executor(also known as a personal representative) is the individual you name to carry out the wishes detailed in your will. He or she also is responsible for settling all your affairs. Consider carefully the person you select for this responsibility. You should also name a successor executor, in case your first choice is unable to act. An executor's job includes the following:

  • Determining your assets;
  • Contacting those you've named to receive property and distributing it to them;
  • Notifying the credit agencies of your death;
  • Canceling your credit cards;
  • Opening a bank account for your estate;
  • Ensuring debt payments, utilities, taxes and other outstanding expenses are paid, while your estate is open;
  • Paying debts;
  • Closing social media accounts;
  • Filing the will in the right probate court; and
  • Filing a final tax return and possibly an estate tax return.

Certain assets are distributed outside of the will, including property that is owned with another person (joint with rights of survivorship), life insurance policies, annuities, retirement accounts and other accounts with a named beneficiary. Be aware that anything with a beneficiary designation passes outside of the will, meaning that directions in the will about these types of assets will not matter: the beneficiary designation overrides the will.

Reference: Inside Indiana Business (June 11, 2018)“With a Will, It's Done Your Way”

Scroll to Top