Real Estate Agent and Trainer, Robert Rico, explains how to transfer property title after the death of the owner, and goes into detail about all of the respective terminology. Do you want to see more video blogs? Subscribe here!
Welcome back to this week’s installation of the CA Realty Training blog – making you knowledgeable and confident about the real estate industry, and encouraging you to be a better agent — week after week!
Though we’ve dealt with the process of how to go about selling a house someone has died in (see our related blog here!), we haven’t discussed yet how to transfer property after the owner dies. The transfer of property from generation to generation is actually one of the main ways to gain wealth in this country (the USA), and you’re an incredibly lucky person if you have someone who’s going to give you their property after death. This scenario is one of the main ways to get ahead of the curve, and one of the most secure ways to guard your assets and net worth against the cycle of inflation and market booms and busts. If this situation is your situation, you have to make sure that everything is set up properly.
We first need to cover the way that property is held. In the States, most property is held in one of two ways – single and sole property, common for single people, and joint property, common for married couples. This is called the vesting on the “Deed” of the house, which is the set of papers certifying ownership of the house. These papers dictate who owns the house, and the manner in which it is held — and this can vary from property to property, even within the same marriage!
One of the main ways that married couples hold property is “joint ownership with right of survivorship” which is a fancy way of saying, they own it together 50/50, and if one of them dies, the survivor will own 100%. This is most common because most couples share their property, and in California, this is the default manner for holding the vesting of a home. However, there are a few other ways to do it, which might actually be smarter in case one or both parties die unexpectedly.
The main thing to note here is what that holds things up in the transfer of property – probate courts – courts designed to divvy up assets after death in the absence of directions. These directions would come from a “will” or “trust”, which are both documents that describe how property is to be owned and divvied up when certain events come to pass (i.e. death, divorce, childbirth).
Probate courts, in short, are terrible! They are slow, laborious, painful, and usually have no interest in keeping everyone happy. Though they may try to please everyone, the absolute best way to go about it is to have your own documents set in place before anything bad happens. Your documents should all be drawn up by a smart, bar-certified lawyer before anything happens, to ensure that your assets down the road are given to whomever you desire.
So, what are the two documents you might use? We will briefly give you details on both a will and a trust.
A will is a set of directions for how to divide property after death — and only after death. These must be signed while in right and sound mind, plus they cannot have been created or signed under duress. For example, a will written by a mentally ill patient may not be deemed valid, especially if there is a contradicting will written when the patient was of legally sound mind. The writer of the will can also not be pressured, whether by friends, relatives, or the lawyer, to will certain assets to certain people — it must be an independent decision arrived at by someone of sound mind.
A trust, though more complex to set up, is a much more secure way to ensure that all assets go to the desired benefactors at the time designated. For example, a “living trust” automatically includes the writer(s) as trustee(s) so that they are allowed to benefit no matter what happens. The additional flexibility over a will, though, is that you can designate certain assets to be disbursed at certain times.
Let’s say you have an investment property that you’re currently renting out, and you also have an adult child who’s single. Maybe that child is living on his own, paying rent to someone else, and living life happily. That’s great! However, if that child gets married and has a child, maybe you want that investment property to go to your child so that your grandchild has a secure home to grow up in. Well, unlike a will, you can do that with a trust! You can set up stipulations and milestones to be achieved, and upon achievement of the milestones (even something as simple as a birthday) the trust can disburse assets to one of the trustees.
Trusts also ensure that your assets avoid the probate courts which, as we said, are no good for anyone but the state. Pay your lawyer, set things up, and ensure that you have a good plan in place! If you have any assets and want to make sure they go to the beneficiaries of your choice, a trust is the best way to go about it.
Thanks for reading this week’s installment of the CA Realty Training Blog – confidence and knowledge for the budding agent, week after week! We hope you learned a little bit more about how to transfer property after a death and what it all entails.