In the realm of life’s inevitable uncertainties, the importance of proactive planning cannot be overstated.
To be able to take care of your loved ones left behind, you need to have a plan in place that distributes your assets according to your wishes and protects your heirs. Without a preset plan, the state can make the determination for you, including what happens to your home.
As a real estate owner, you have the power now to determine who will get your house, vacation home, land or any other property. The best course of action is through estate planning.
A Succession Plan for Your Estate
Your estate is any assets you have at the time of your death including financial, auto, or real estate. Estate planning is taking the legal steps to ensure that after your death your assets are distributed according to your wishes, not the courts. With estate planning, you can also reduce the tax burden from inheritance or estate taxes that may be incurred by your heirs due to the transfer of your assets to them.
Part of your estate planning is having a succession plan for your assets, including your real estate. This is making decisions about when and to whom your property will be going to. This can be done by transferring your house or other real estate to family members through intra-family deed conveyances, or into a legal trust. These transfers can be either during your lifetime or by distribution according to your will.
One of the primary legal documents involved in estate planning is a will. A will is important since its an instrument that explains your wishes for your assets after your death, including any property you own. With a will, the distribution of your estate is done through probate court. The Probate court proves a will’s validity and ensures that the assets of the deceased are distributed lawfully per the decedent’s wishes. Without a will, the distribution of assets is generally determined by the courts.
Transferring Real Estate during Your Lifetime
Transferring your property during your lifetime is the most effective way to ensure your property is conveyed to your wishes. If the intention after the conveyance is for you to still live in your home, you may want to retain a life estate interest in the property. Your life estate ownership ends when you convey your interest by deed or on your death. Unless otherwise stated, your interest reverts to the property owners. The benefits of a life estate ownership are that the property generally won’t have to go through probate, and your heirs won’t incur inheritance or estate taxes.
You can also transfer your real estate into a trust. A Trust is a fiduciary arrangement that allows a third party to hold assets on behalf of beneficiaries. Trusts generally are not considered as part of an estate and can help alleviate estate tax burden for your heirs.
Valuation discounts on the transfer
Valuation discounts are used when ownership of real property is broken up into fractional interest as tenants-in-common (TIC). A fractional interest is when two or more individuals each own a share of an entire parcel of real estate.
As tenants-in-common, each person or entity owns a percentage of interest in the property, not a 100% interest. This reduces the value of their share of the property, thereby should reduce any estate tax when their share of the property is transferred upon their death.
Protection of real estate from divorce, liability, and creditors
Using estate planning can protect your real estate from potential issues after your death. Placing your property in a trust, or conveying it to other family members may keep it out of courts for divorce cases and out of reach of creditors. Transferring your assets may also relieve you or your estate of any possible liabilities.
The best way to protect your real estate is to hire an estate planning attorney. Your attorney will work with you to understand the importance of estate planning and guide you on the best steps to take to protect you as a real estate owner, your assets, and the interest of your heirs.
Estate planning is not just a legal formality; it is a thoughtful and proactive process that empowers real estate owners to secure their legacy, safeguard their loved ones’ futures, and maintain control over the destiny of their assets. By crafting a comprehensive estate plan, including a will, trusts, and strategic property transfers, individuals can ensure that their real estate holdings are distributed according to their wishes, while minimizing tax burdens and legal complications for their heirs.
Beyond the financial aspect, estate planning offers a shield against potential adversities like divorce, liability, and creditors, ensuring that the fruits of one’s hard work and investments continue to provide for their family’s well-being even after they’re no longer here. Engaging with an experienced estate planning attorney is the key to navigating this intricate landscape and safeguarding the interests of real estate owners and their beneficiaries. By taking these essential steps today, individuals can find peace of mind in knowing that their legacy will endure and their loved ones will be well cared for in the years to come.