Homeownership can be complicated, but we also think it’s one of the most rewarding ventures out there. In our new series, Ask an Edina Realty Lawyer, we are hoping to demystify some of the trickier aspects of buying, selling and owning a home. In our first edition, one of our lawyers discusses the options homeowners have in planning for the disposition of their real estate after they pass.
Dear Edina Realty Legal,
I am a homeowner. As I get older, I start to worry about what will happen with my home when I die. Is there anything I should be thinking about in that regard?
Edina Realty Legal:
It can be hard to plan for what happens when you die. But it is important to prevent your heirs from some unexpected hassles in dealing with your real property (your home and other land). We see issues arise all the time when there isn’t proper planning.
In Minnesota and many other states, if your estate (which is all the property and items you own when you die) contains real property, the estate will have to go through probate. Probate is a process that occurs in the courts where your heirs ask for court approval to deal with your estate.
Normally, people who inherit a home don’t intend to live there, but rather end up selling it. We often see delays and complications in getting a home sold when it needs to go through probate.
There are a number of ways to avoid probate, including:
- Joint tenancy: If you hold property in what’s called joint tenancy with someone else, the property passes to them immediately upon your death. It is common for a married couple to own their home as joint tenants.
- A trust: Sometimes, people create a trust to hold their real estate. That way, their estate never owns the property.
- Life estate: In the past, a technique to avoid probate was to deed your property — maybe to your children — and then retain what is called a life estate, giving the holder a right to the property until death.
It’s important to note: Naming an heir of the property in your will DOES NOT avoid probate when real estate is involved.
Because some of these ways to avoid probate caused problems or perhaps were complicated, some legislatures have created a method of documentation that allows an estate to bypass probate when it comes to real estate. The method is called a Transfer on Death Deed and it’s available in many states, including Minnesota and Wisconsin.
Here’s how the Transfer on Death Deed works:
- You sign and record a deed of your property to a person or persons of your choosing.
- The deed has no effect on, and the recipient has no interest in, your property until you die.
- Upon death, the deed becomes effective and the property passes to the recipient. To finalize the process, the recipient will just need to file some simple paperwork with the county.
- You can change your mind and revoke the deed at any time prior to your death.
The Transfer on Death Deed could be a useful tool to help in your estate planning – and it may protect your heirs or property recipients from a complex probate process. If this sounds like something you are interested in, you should contact a local attorney.
The Edina Realty Legal Department serves as in-house counsel for Edina Realty and does not represent private clients. The insights included here are not intended to provide legal advice.