All real estate investors need to consider what to do with all of their real estate assets when estate planning. After all, the last thing you want is to have your will end up in probate court, where it could be years before your estate settles. With that in mind, below are some options on how to include real estate investments in your will. Read on below to see which option might make the most sense for you and your intended beneficiaries.
Establish a living trust
The first option for your estate plan is to set up a revocable living trust. With this option, you would transfer any deeds into the trust's name. Then while you're still living, you would be the trustee and be able to alter your living trust in whatever way you see fit. At the same time, you would also name a successor trustee who will take care of disbursing your estate assets to your beneficiaries when you eventually pass.
Trusts are a little more costly and time consuming to set up than wills, so you'll likely need to hire an estate planner to do the legwork. However, once it's done, the trust will allow your trustee to pass along any trust assets quickly and easily while avoiding the probate process altogether.
Getting a beneficiary deed
Another option is to get a beneficiary deed, which is sometimes also referred to as a transfer-on-death deed. As the real estate owner, this process involves getting a second deed to each property that you own. While each beneficiary deed won't affect your ownership of the property while you're alive, they will allow you to make a specific beneficiary designation for each property in your portfolio.
After your death, the person in charge of executing your estate plan will be able to transfer ownership of each asset to its designated beneficiary. The downside here is that not all states allow for this method of transferring ownership. It's in your best interest to ask an attorney for more information before deciding to go this route.
Set up co-ownership
You can also pass along real estate assets without going through probate if you co-own the property with your designated beneficiary. To do this, all you would need to do is to change the title for the property to list your beneficiary as a joint tenant with right of survivorship. Then the property will just pass directly to your beneficiary when you expire.
The potential downside to this method is that any intended beneficiaries will have an ownership interest in the property from the moment they're on the deed, which means that you will have to consult with them if you ultimately decide to sell the property. If you don't want another party to have that amount of oversight while you're still living, you may want to talk to an estate planner about researching other options.
The bottom line
Dealing with wills and estate plans can feel like a morbid topic and a lot of extra work to put on your plate. However, it's worth doing the work ahead of time to avoid having your estate go through the probate process once you eventually pass on. A probate court can take years to decide how to disburse estate assets, especially when they're as valuable as real estate.
If you need help drafting up your estate-planning documents, your best bet is to hire an estate- planning attorney to do the work. They can help walk you through the available options and help you decide which course of action is the right choice for you.