When a family member dies, ownership of their property should transfer to next of kin. Unfortunately, if the person dies without a will, state law determines who gets the property, through the probate court. With a little planning, individuals and family members can plan to avoid the probate process so that property is inherited without undue delay.
An estate planning attorney can assist individuals and families in preparing for a property transfer that doesn’t involve court intervention. It’s a good opportunity to have your entire estate evaluated and a comprehensive succession plan put in place.
Tools for Assigning Property Ownership
There are several legal tools that allow property owners to name heirs for their real estate. Done right, you can bypass the probate court process that reveals private details to the public, charges fees, and takes as much as a year to resolve.
The following options for assigning ownership to a successor require filing paperwork with the right county office (where the deed for the property is recorded). Your estate planning attorney can evaluate your assets and individual situation to recommend one from the following list that would work best for you, such as:
- Joint tenancy with right of survivorship. This option allows a property owner to put their spouse or another cohabiting family member on the deed to a home, allowing either to become sole owner upon the death of the other. Experts caution that adding a child or other non-spouse to the deed can expose the property to the person’s creditors.
- Tenancy by the Entirety. This is similar to joint tenancy with right of survivorship but is reserved for married couples residing in Illinois.
- Transfer on Death Instrument. This is a notarized instrument (document) that is signed and recorded on the property deed, naming the person who should inherit the property upon the owner’s death. It must be signed, witnessed, and recorded before the owner’s death.
- Revocable Living Trust. Creating a living trust is a financial tool that allows an individual to continue using the items and assets during their lifetime. At their time of death the trust is administered by an appointed trustee and items are distributed to heirs, bypassing probate court. A trust requires significant effort by an estate attorney but is the preferred option for complex portfolios of assets.
Before creating or signing any deed or trust document, confirm how the property is titled and ensure that mortgage lenders or co-owners are aware of any ownership changes.
Coordinating the documents is critical. The will, deeds, and trust tools should complement one another and be updated simultaneously (updates are suggested on a regular basis, and required when there’s a family milestone like a new family member, marriage, divorce, or death).
The caveat is that transferring property can trigger gift taxes or estate taxes, depending upon laws of the state where the property is located. (Illinois does not have a gift tax, and estate taxes are triggered when the property is valued at $4 million or more.) Your estate planning attorney can detail the implications of each before a decision is made.
In addition to these options for transferring property, assets like investment accounts, insurance policies, and bank accounts can be transferred upon death, bypassing probate, by adding a beneficiary. This is a simple process of paperwork that allows the asset to pass directly to the person you’ve chosen.
The Right Advice at the Right Time
It’s never too early to start thinking about preparing for your family’s future with estate planning. The right estate planning tool or tools depends on the individual estate, family dynamics, and even the appetite for taxes. The professionals at Legacy & Life Law Firm can evaluate your needs and examine your assets to determine the best approach. Call for a consultation today.