Your Estate Plan and Your Home: What Happens to Real Estate After You Pass Away

You may already know who you want to inherit your home. What may be less clear is how the property will actually get from you to them.

In California, that answer depends in part on how the home is owned and how it fits into your estate plan. A home held in a living trust may be handled very differently from one owned individually or jointly with someone else. Understanding those differences can help you make sure your plans for the property actually work as intended.

Start With How the Property Is Owned

One of the first things to look at is the deed.

Real estate can be owned in several different ways in California. You might own the property individually, with a spouse or another person, or through a living trust. Some forms of co-ownership also include survivorship rights.

Those differences matter. For example, property owned in joint tenancy generally passes to the surviving joint tenant when one owner dies. Property held in a living trust can generally be managed and distributed by the successor trustee according to the terms of the trust.

This is why an estate plan and the title to your home need to work together. Your documents may state what you want to happen, but the way the property is legally owned can affect how that plan is carried out.

What If Your Home Is Included in Your Will?

A will can state who should inherit your home. That does not necessarily mean the property will avoid probate.

If real estate is owned in your individual name and does not have another method for transferring at death, the property may need to be addressed through the probate process. The personal representative of the estate is responsible for handling estate property and ultimately distributing it to the appropriate beneficiaries.

Depending on the circumstances, that could mean transferring the home to the person named in the will. In other situations, the property may need to be sold as part of administering the estate.

A will is still an important estate planning document. The key distinction is that a will tells others what should happen to property subject to it; it does not, by itself, make probate unnecessary.

What Happens When the Home Is in a Living Trust?

A living trust can provide a different path.

When a home has been properly transferred into a living trust, the successor trustee can generally manage the property after the owner’s death without putting that asset through probate. The trustee then follows the instructions in the trust.

Those instructions do not necessarily have to say, “Give the house to this person.” A trust can provide much more detail about what should happen.

You might want the home sold and the proceeds divided among several beneficiaries. You might want one beneficiary to receive the property. Depending on the family’s circumstances and how the plan is structured, there may also be instructions addressing when or how the property is distributed.

The important part is making sure the home is actually titled in a way that works with the trust. Creating a trust without properly addressing ownership of the real estate can leave a gap between the estate plan on paper and the assets it was intended to cover.

What About a Home Owned With Someone Else?

Co-owned real estate deserves a separate look because the answer can depend heavily on the form of ownership.

If the deed provides for a right of survivorship, the surviving owner may receive the deceased owner’s interest without that interest passing under the will. Joint tenancy is one common example.

California also has specific rules affecting property owned by spouses and registered domestic partners. Whether property is community property, separate property, or held with survivorship rights can affect what happens after one owner dies.

This is another reason not to assume that a provision in a will controls every piece of real estate. The deed and the estate plan should be reviewed together.

Your Beneficiaries May Not Want to Keep the House

Estate planning for real estate is not only about deciding who gets the property. It can also help address what happens next.

Suppose three adult children inherit a home together. One wants to keep it, another would rather sell it, and the third lives across the country and has little interest in being a property owner. Leaving the home equally to all three may sound fair, but it can create decisions they have to make together later.

There may also be a mortgage, property taxes, insurance, repairs, maintenance, or other ongoing expenses to consider. If one beneficiary wants the home, would that person be able to buy out the others? If the home is supposed to be sold, who will be responsible for maintaining it until the sale is complete?

You do not need to predict every possible situation. It is worth thinking beyond the initial question of who should inherit the property, however. The practical responsibilities that come with a home can be just as important as its value.

Do Not Forget About Changes to the Property

Your estate plan should also keep up with changes involving your real estate.

You may sell one home and buy another. You may refinance, acquire a vacation property, change how a property is titled, or move property into or out of a trust. A plan that accurately reflected your assets several years ago may no longer line up with what you own today.

This is especially important when a living trust is involved. If you purchase a new home after creating the trust, it is worth confirming that the new property has been addressed appropriately rather than assuming it is automatically covered because you already have a trust.

Reviewing your real estate after a purchase, sale, refinance, or other significant change can help identify issues while there is still time to correct them.

Make Sure Your Home and Your Estate Plan Work Together

Deciding who should receive your home is an important part of estate planning, but it is only part of the process. How the property is owned and how your estate plan is structured can determine what actually has to happen before the home reaches the people you intended.

If you own real estate in California, The Estate Planning Law Office of Jonathon L. Petty, Inc. can review how your property is titled and how it fits with the rest of your plan. Taking the time to coordinate the two can make it easier for your wishes to be carried out and reduce unnecessary complications for the people you leave behind. Call our offie at 559-374-2223, or complete our online contact form to schedule a conversation.