Keeping a piece of property in the family can be a point of pride and a sentimental touchstone. It’s also a way to transfer wealth to your children and grandchildren. Understanding and properly using the tools available to transfer real property requires planning.
The counsel of an estate planning attorney can protect your assets and ensure that they are handed down to the next generation. The right estate planning tools will help your heirs avoid expensive and drawn-out legal processes and reduce conflicts among family members.
5 Tools for Property Transfer and How to Use Them
There are several methods of transferring family property to heirs, but each requires specific legal procedures and documentation to have the desired effect. Other family members or outsiders can challenge property transfers that are not executed appropriately. Consider the following tools for passing down property:
- A will is the minimum document necessary to confer your final wishes for property to be transferred to your heirs. The state probate court will validate the document and oversee the process of executing your directives.
In the absence of a will, probate court follows state law in dividing your assets and awarding them to your heirs. In Illinois, “intestacy laws” generally divide your estate among your surviving spouse and any children. In the absence of a spouse or children, your assets are inherited by your parents, siblings, or siblings’ children.
- Trusts are frequently used to pass assets to heirs. Two forms of trusts, revocable and irrevocable, allow items in an estate to pass to a subsequent generation without going through probate, making for a faster and more private process. Certain trusts (generation skipping and dynasty) can also limit estate tax exposure, and they may be structured to disburse funds to family members gradually. Additionally, you may include specific instructions regarding ownership and care of an inherited property.
- Joint ownership and transfer on death are provisions that allow real property to pass to a new owner automatically upon the death of the primary owner. By putting a spouse or an heir on the deed to property as a joint owner, possession is assumed immediately. Illinois is one of few states that allows transfer on death, which is limited to residential properties and requires a specific form. In either case the correct paperwork (such as recording a new deed) must be done in advance.
- Beneficiary designations apply to accounts like savings, investments, and insurance, allowing the person named to assume control upon the death of the primary account holder. These options can also provide cash flow to maintain an inherited property while the estate is in probate.
- Life estates allow a person to continue living in a property even as ownership changes. This typically applies to a spouse or partner who is not a joint owner on the deed being allowed to stay in the property indefinitely after the death of the owner and transfer of the deed to heirs.
It’s important to understand that Illinois state law differs from many others in ways that significantly impact estate planning, including:
- Common law marriage is not recognized, so life partners are not automatically accorded the same inheritance benefits as legally married spouses.
- Illinois is not a community property state; the courts primarily consider title and intent when determining ownership rights. That means that a spouse, even when legally married, may not automatically inherit property that was owned solely by their partner if the partner willed it to other heirs.
Tapping Into an Estate Planner’s Critical Knowledge
Partnering with an experienced estate planning professional from Legacy & Life Law is your key to establishing a comprehensive strategy to pass your assets to the next generation. A professional estate planner can help minimize tax exposure and ensure all of the necessary documents are filed so your wishes are executed as planned.