Buying real property is one of the most important financial decisions many people will make in their life. It’s a decision that does not necessarily get easier the more times it is done and, especially in the last several years, can be very risky. That said, it is also one of the most important assets in your life; it means shelter, building equity, and pride in ownership. If you already own real property, we don’t have to tell you the mountain of paperwork you have to sign is complicated! But, it’s important to recognize, keeping that paperwork in order is one of your most important tasks. Did you get that it’s important?
When you purchase a piece of real property, the very next stop you make after your realtor’s office is your attorney’s office. If you have not already created a revocable living trust, you should do that first in order to create California’s most effective vehicle to avoid probate. Discussing your estate planning concerns with your attorney can help the attorney recommend the right type of trust for you, whether that is a standard trust, a QVap, or a QMap trust. Then, you should fund it with that recently purchased property. This means taking the deed you feel like you just signed your life away for and replacing it with a new one.
When you refinance your mortgage or take out a line of credit, lenders often require you to transfer the property out of trust. Often, the lender will graciously complete this task for you as part of their service; you may not even realize that it is among the many refinance documents you are signing! If you are unsure whether your lender transferred your property out of trust, you should verify the title of your property with your attorney at your next trust update appointment. Lenders sometimes, but not always, transfer property back into the trust once they are done, which could negate all the efforts you have put into your estate plan ahead of time.
When you inherit real property, you should contact your attorney and ask him to put it in your trust as quickly as possible. If you are the Executor or Trustee of the estate and also a beneficiary of that estate, you must transfer the house to yourself and…? You guessed it! Put it in your own trust (and make sure you complete the proper paperwork to take advantage of Prop 13, if applicable)!
You have probably been told over and over to put your house in your trust, but there are other types of real property you may not have considered. If you own timeshares in California or elsewhere, you have a deed to that property. Although its value may be small, it is best to ensure that it is part of your estate plan and, especially if you own a lot, it is in trust.
Additionally, property held in other states could cause what is called an “ancillary probate.” Essentially, this means that a probate proceeding may need to be initiated in the other state in which you own real property. Not only does an ancillary probate add to the complexity of administering your estate, it will cause innumerable additional headaches for your heirs who will need to find an attorney, determine the level of involvement required in that state, and wait for that proceeding to be completed.
Finally, many people in California own oil, mineral, and hydrocarbon rights in the state of California or other states. Especially when the rights produce royalties, they can be extremely valuable. Getting the deed granting you the rights to the royalty interest and underlying property is a much easier task to complete during the estate planning period rather than during administration.
In sum, if you have a deed, you should make sure that it says your name as Trustee of your trust. If it does not, take the time to transfer now while you can!
Estate Planning: The Price of Organization, Rewards, Gifts, and Wondrous Tax Things…
FREE REPORT: This complimentary report, focused on Estate Planning, is comprised of many of Mr. Miller’s articles from his long running column for the largest regional newspaper in San Diego County. This report will guide you through the questions surrounding getting your estate planning in order.