An important and sadly overlooked aspect of real estate ownership is the effect of estate planning on title. How title is held, how title is transferred, how title is restricted – these critical issues can be resolved with a properly drafted estate plan.
At a minimum, every individual owning an interest in real estate should have a Last Will, which directs its disposition at the time of death. Depending upon the value of the real estate, title would be transferred by court order through a probate administration. Of course, there are time delays, court costs and legal and administration fees surrounding a probate transfer of title. Still, there is a safety issue with having a court order ensuring the proper transfer of title.
I have seen many instances, as an observer and as an attorney, where good intentions often go bad. For instance, I represented the next of kin of a woman who had erroneously omitted them from her Last Will, leaving her real estate to her gardener and his caregiver wife. After a 6 month trial in the Burbank probate court, and after expending over $60,000 (for only one of the parties!) in legal fees, the next of kin won the case. However, all of this could have easily been resolved with a simple, clear, concise and properly worded Last Will.
Married couples and other family relationships may be inclined to hold title as joint tenants as a means of avoiding probate court administration. Although this is an easier way to transfer title, there may be unexpected and hidden income, gift and estate tax problems with this manner of title.
Living trusts have become increasingly popular with respect to the transfer of title, both as to the probate court avoidance benefits as well as the estate and income tax advantages of holding title. However, and as with the Last Will, an improperly drafted living trust may sadly result in probate court involvement as to its interpretation and administration. Which is what someone is trying to avoid in the first place!!
This post is intended as a brief introduction to ongoing discussions regarding estate planning, probate, elder law, family partnerships and other topics that are critical to real estate. If you would like more information on a particular subject, please feel free to drop us a line. We look forward to sharing ideas on the best way to approach real estate ownership.
Darrell Brooke
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