At Citadel Law Firm, we are often asked questions regarding real property and home. A lot of our client want to protect their house in the estate plan. For a large portion of the public, their house is one of their largest assets and our clients wish to know exactly how they should handle these assets. The question often becomes what if I do nothing, what will happen to my home, or what are some of my options for planning for my home. This post offers you several alternatives, but every person, situation, and estate plan is unique and should be approached as such.

It is important to remember our goals of estate planning; mainly that we aim to avoid probate when someone passes away, we ensure that the decedent’s assets go where they want them to go, and we provide protection during life from incapacity. With those goals in mind, the answer to how to treat real property or a home becomes quite simple; depending on your circumstances, we can either utilize a beneficiary deed, a revocable living trust, or some form of an irrevocable trust. For rental homes, we may want to us a limited liability company and a living trust. Below please find a list of frequently asked questions, and their answers.

What if I do nothing?

If you do not have an estate plan in the State of Arizona and you pass away, Arizona intestacy law will govern the situation. If you have cumulatively more than $75,000.00 in assets, or more than $100,000.00 in real property, then your estate will end up in Probate Court. Probate Court is where a judge will decide who gets what under the law. This is generally straightforward, but the law can carry with it several surprises. For example, if you have a child from a previous marriage, and a current spouse when you pass away, they will both be your heirs at law, unless you prepare an alternate estate plan, such as a Last Will and Testament or a living trust. There is also always the risk of estate litigation, and if your estate ends up with a controversy, your loved ones may end up spending a significant amount of money on attorney’s fees.

In other words, if you do nothing, your estate may end up in court and the people you think will inherit your property may not inherit it depending on what state law says. This can also end up costly.

What is a Beneficiary Deed?

For those of our clients with a simple estate, we will sometimes offer a will-based estate plan. The Last Will and Testament is the cornerstone of this plan and come with powers of attorney, a health care power of attorney and a financial power of attorney. While this plan ensures your assets go where you want them to, and helps to protect you during life from incapacity, this plan doesn’t always avoid probate. There are extra steps you would need to take to ensure that your estate doesn’t end up in court. One of those steps is to execute a beneficiary deed. While the beneficiary deed is most often completed as part of an estate plan, it can also be used as a stand-alone tool. With a beneficiary deed, you simply list who you want your home to go to when you pass away, and then record the deed with the County Recorder’s Office. This does not change your ownership. This only takes effect when you have passed away. The beneficiaries that you list will simply need to record a death certificate and an affidavit, and now they will own the home. There is no need to go to court. Before exercising this option, you will want to discuss if this is the best option for you. An experienced estate planning attorney can review your circumstances and make proper recommendations. Having an estate plan for your home that uses a beneficiary dead is not a bad option but it may not be the best for you.

What about a Revocable Living Trust?

Another option for handling a home or real property with regards to estate planning is to deed the home to a revocable living trust. A properly funded Citadel Law Firm revocable living trust package checks all of the boxes; the trust avoids probate, it ensures your items end up where you want them to end up, and the ancillary documents provide protection from incapacity during life. With a revocable living trust, we simply “fund” or deed your home to the trust. We do this by executing a recording a deed from you, as an individual, to you as a trustee. This ensures that the asset avoids going to probate court and it will then be distributed according to the rules you put in your trust when you pass away. This is a fantastic option for your primary residence and a great way to ensure privacy and avoid probate court. For most of our clients, this is the best option. Revocable Living Trusts also have several other positive aspects, such as the ability to protect your beneficiaries from their own creditors, or to protect a disabled loved one. An estate plan for your home that uses a revocable living trust is a very common strategy, specially for younger people.

Is an Irrevocable Trust an Option?

In rare instances, we may recommend our clients use an Irrevocable trust. This option only applies to a slim portion of our clients and is a great way to remove your primary residence from a taxable estate. If you have a taxable estate, meaning that your assets are over the federal lifetime gifting exemption, please call our office and book a free consultation to discuss your options for tax savings. The exemption is high now, but this amount changes quite often depending on the federal government. There is no need to risk paying the exceptionally high estate tax rate on all of your assets when you pass away.

Is there a difference in options for Rental Properties?

The previously listed options are great for primary residences, but what about a rental home? We will often recommend that our clients utilize Limited Liability Companies to hold their rental properties. This helps you to avoid the liability that can be associated with renting properties out for profit. We also recommend obtaining liability insurance on the property. With the Limited Liability Company, we can assign your ownership of the business to a revocable living trust so that the asset will avoid probate. Essentially, you will own a trust, and the trust will own the business, and the business will own the property. Coupled with liability insurance, this provides the maximum level of liability protection for you and will avoid probate and protect your privacy down the road.

In conclusion, protecting your home and your family with an estate plan is something worth investing your time on.  Please call Citadel Law Firm office to set up a free consultation in which you can discuss your circumstances with one of our experienced attorneys. You can call (480)565-8020 or click here to schedule your free consultation today.