For most people, their home is their most valuable asset. People work for their entire lives to make sure that they have a secure, enjoyable, and comfortable home. Accordingly, your home should occupy a central role in your estate plan.
In the majority of cases for married couples, the marital home is titled as a “joint tenancy with right of survivorship.” This means that when one spouse passes away, the deceased spouse’s ownership interest automatically transfers to the surviving spouse, without the need for probate. This helps smooth the process for the surviving spouse, as it omits the need to have the house tied up in probate proceedings. This means that the surviving spouse can transfer or sell the house right away, instead of waiting for the probate process to finish, which can take months or even years.
One potential draw back to this approach is if you have children from another marriage or relationship. Because the interest passes directly to your spouse upon your death, your children are completely bypassed in this process. There is no legal requirement that your spouse must leave a portion of the marital home or its proceeds to your children after he or she passes away. The end result could be that your children receive a much smaller amount of assets after your death than they otherwise would have received if the marital residence did not directly pass to your new spouse.
Another tool for estate planning and the marital residence is the use of a trust. There are several different types of trusts that are helpful when considering passing on the marital residence. One of these is called a qualified personal residence trust, or QPRT. With a QPRT, the marital residence goes into an irrevocable trust, and you can continue to reside there rent-free for the QPRT’s duration. At the conclusion of the QPRT’s term, the real estate is transferred to the person you name as beneficiary in the QPRT. A revocable trust (also known as a “living trust”) is another potential choice. With a revocable trust, unlike a QPRT, the trust’s creators (the “grantors”) can revoke the trust at any time. It also means that the homeowners continue to retain the power to sell or transfer the home. A revocable trust allows you to avoid probate, but does not provide any meaningful level of asset protection.
If you have questions about your real estate and how to make sure that you are taking the right steps to protect your family, call us today. We can talk with you about your situation and what we can do to help you.