Expert Tips for Incorporating Real Estate Into Your Estate Plan
When you first buy your home, you’re consumed with the newness and the excitement of it all. You picture your family enjoying it for years down the road, and you look to the future with great anticipation. Chances are, you aren’t thinking too much of what happens to your home once you’re no longer living. As difficult as it is to consider, it’s important to know what steps to take to ensure your property is handled according to your wishes.
If you intend to pass along your real estate assets to your heirs, there are steps you can take now to get those affairs in order, preventing your loved ones from having to make emotional and difficult decisions later. Today, we’re discussing a few hot-button issues surrounding these decisions and expert tips you can follow to help make the process as simple and straightforward as possible.
The Importance of Creating a Will
While a will is not required to pass along a real estate asset to your heirs, it’s always recommended. The laws in your state should enact what’s known as the Intestate Statute, which will automatically pass your land and property to your closest relatives. Yet, if you have specific directions concerning the land (for instance, you want separate parcels to be kept together) or you desire that the family home go to a certain individual, a will is a must-have.
A will is also required if you don’t want your property to go directly to your heirs or for certain persons in your family to profit from the sale of your estate. Especially if you don’t plan to have children, you can choose anyone to inherit your real estate assets, even a charity organization. Yet, to ensure these wishes are carried out, you’ll need to spell them out first, and this is where a will is critical.
Then, once an heir inherits your property, he or she will need to make a separate will as soon as possible to make sure these assets are maintained in the same way.
Splitting Up Assets
Do you own multiple homes? For instance, you might own a home at the beach and one in a rural suburb. In this case, you might be considering splitting up your real estate assets between your heirs. This can be achieved, but you’ll need to make your strategy known during the time you create your will.
The same applies to land and acreage tracts. If you have a considerable amount, you might consider giving one heir a larger or smaller portion than the next. At this time, you can also designate individual heirs, meaning that if two spouses share equal ownership of a property, one can choose to have his or her 50% shared with specific beneficiaries.
How a Trust Factors In
With all of this discussion surrounding a will, one might be wondering how a trust fits into the whole plan. Before we discuss the importance of establishing one, it’s helpful to know how a trust works. To begin, it’s not the same as a will, which goes into effect after one’s death. Rather, a trust goes into effect if you become incapacitated, but are still alive. If this occurs, you’ll need to designate someone to manage your real estate assets while you’re still living, but unable to make decisions on your own.
To this end, you’ll need to designate someone to act as your trustee. You’ll also need to select a back-up trustee in the event that this person isn’t available or capable. A testamentary trust will be included in your will, but you’ll also need to make what’s known as a living trust. Both can include your real estate assets, including land.
Once you establish a living trust, you’ll need to determine if it should be revocable, meaning capable of change, or irrevocable, meaning permanent. This will be one of many decisions you make as you navigate the myriad estate planning forms required during this process. In preparation, it’s helpful to learn more about what to expect at this juncture.
In the case of the an irrevocable trust, the real estate becomes property of the trust itself. In this sense, the homeowner takes on a role akin to a renter, in which case he or she can live in a home and even make changes to it, but doesn’t ultimately “own” it. This can be an ideal setup and can keep your assets out of probate, but keep in mind that you are bound to the terms.
Conversely, a property owner can alter the terms of a revocable living trust. This can be helpful in the event that you add more heirs down the road whom you want to include, or if something changes with your previously-designated heirs.
Looking Smartly Into Your Future as a Homeowner
It’s unwise to leave your assets up to chance. As a responsible homeowner, it’s your obligation to make sure that you’re managing your property as proactively and strategically as possible. The reality is that no one is a mind reader, and determining your intentions is impossible after your death. As such, it’s essential to get all of your instructions out in writing today to avoid both headache and heartache down the road.
Contact a trusted attorney today to jumpstart this important process. Though it might be an extensive procedure, it can save your loved ones’ relationships and prevent them from shelling out thousands of dollars to cover legal costs. So, have that hard conversation today and get the ball rolling. Everyone in your corner will be grateful you were looking ahead, even while you’re still celebrating those keys to your new place.