How to Give Real Property to a Loved One at Your Death Without Probate Court Involvement

A home is often one of the most important assets that people own. Therefore, most people want to stay in their homes until they die and then have a loved one receive it.

One common way to pass a home to loved ones is through a will. Transferring property with a will needs probate. This process is often long, expensive, and public. Many people try to avoid it.

Several ways exist to transfer property without a will or probate court when the owner dies. You can transfer property for life through a sale or gift.

Special deeds also work differently. These deeds only take effect when the property owner dies.

They do not require the property to go through probate. However, using these deeds for probate avoidance can potentially introduce new issues. A trust-based estate plan may be a better option if the goal is simply to avoid probate.

Ready to explore your options for transferring real property without the hassle of probate? Contact us today to discuss how we can help you create a personalized estate plan. Reach out at [email protected] or call 702-852-2577. You can also schedule a consultation at your convenience by visiting https://calendly.com/cpaattorney.

Home Ownership and Inheritance 

We are living through one of the largest intergenerational wealth transfers in history. About one in six Americans expect to get an inheritance in the next 10 years. Among them, nearly half think they will inherit property like a house. 

According to Pew Research, in 2021, nearly two-thirds of US households lived in a home they owned as their primary residence. Homeowners usually have about $174,000 in equity in their homes. This is more than double the value of their next biggest asset, retirement accounts, which average $76,000. 

Real Property, Legal Rights, and Trusts

A key idea in estate planning is to respect people's wishes. This means helping them control what they own and what happens to it after they die.

An estate plan helps a homeowner decide what happens to their property after they die. It ensures the property goes to the person or people they choose. They can decide how to use it. This might mean keeping it in the family with limits or giving it to a beneficiary without restrictions.

Options for Transferring Real Property at Your Death

Estate planning is exceptionally flexible. It offers many ways to fulfill a person's wishes for their money and property after they die. Each option has its benefits and downsides.

To avoid probate, there are many ways to transfer real property, both during the owner’s lifetime and at their death. Some solutions can cost less than a trust, but as the examples below show, they can also have significant downsides and risks. 

Deed-Based Transfers

A deed is a legal document. The process transfers property ownership. The current owner goes by the name of the grantor. People know the new owner as the grantee.

The grantor can use several types of deeds to gift real property at their death. They include the following: 

• Life estate deed. A life estate, created through a life estate deed, gives a person the right to live in and use a property for their lifetime.

• People call the owner of a life estate the life tenant. The remainderman is the person who receives the property after the life tenant dies.

• Some people might use a life estate deed. This lets them live in their home while they are alive. They can also name a remainderman. The remainderman will get the property when the life tenant dies.

• A life estate helps avoid probate. However, the remainder must agree for a change to occur.

• The goals, legal rights, and responsibilities of the life tenant and the remainderman can differ. This may lead to disagreements about property use, improvements, or maintenance. In addition, a life tenant cannot liquidate or sell the property without the remainderman’s agreement. 

• Enhanced life estate deed. People also call an enhanced life estate deed a ladybird deed.It lets the grantor, who is the life tenant, keep living in their home. The grantor can also use, mortgage, sell, gift, or transfer the property. They can do this without needing the remainderman's signature or approval while they are alive.

• When the life tenant dies, the remainderman will get the property if they still own it. This allows the property owner to choose who will receive the property after their death. They can keep control of it during their lifetime. However, this type of deed is not available in all states.

• Beneficiary deed. A beneficiary deed, also called a transfer-on-death (TOD) deed, transfers property to a named beneficiary.

• This happens when the property owner dies. The transfer avoids probate, and the owner can revoke the deed anytime during their lifetime. However, not all states allow beneficiary deeds.

Again, not all these types of deeds are legally valid in all states. An experienced estate planning lawyer can explain the tools you have. They can also discuss the benefits and risks.

Downsides to Using a Deed to Transfer Property at Your Death

There is no creditor protection for your beneficiaries. When a deed transfers property to a beneficiary, that property goes to the beneficiary outright. There are no strings attached and no protections. 

For instance, if the beneficiary were to receive the property during a bankruptcy proceeding, it might be used to satisfy the creditors because it is now considered the beneficiary’s property.

There is no protection if the beneficiary is disabled or unable to manage their affairs. As previously mentioned, when the beneficiary receives the property, it is theirs. However, if they receive the property when they cannot manage their affairs, its management falls to another person.

It may be handled by a court-appointed guardian or conservator or an agent under a financial power of attorney, who can do whatever they want (as long as it is in the incapacitated beneficiary’s best interest). Also, if the beneficiary receives any means-based assistance, the sudden inheritance could jeopardize those benefits by placing the beneficiary above any applicable asset threshold.

There are no protections for you if you cannot manage your affairs. These deeds are a sufficient way to transfer property after you are deceased. However, if you cannot manage your affairs during your lifetime, the named beneficiary or remainderman has no access to or interest in the property to help you manage it until you pass away. 

You will have to rely on an agent under a financial power of attorney (if you have one) or a court-appointed guardian or conservator to manage the property on your behalf.

Your beneficiary is free to do what they want. As already discussed, if you use a deed to transfer ownership at your death, your beneficiary will receive the property outright. You cannot add any conditions or requirements regarding the property or its use.

The beneficiary can sell, mortgage, or use it as a rental property (subject to applicable zoning restrictions). It is their property to do with as they please. Their intended use of the property may not align with your wishes.

Using a Trust to Transfer Real Property

While you may view your home as a place to live and not as an investment or financial vehicle, that perception can change when you pass away and the home passes to a loved one, particularly if that loved one already has a primary residence. 

A beneficiary who inherits a home may decide to sell the property; turn it into a rental; renovate the property to use it as a farm or business; sell off individual structures on the property (such as a barn or historic structure); cash in on its natural resources (e.g., allow timber to be harvested); or even tear down the original home and build a new one in its place. When more than one beneficiary inherits the property, disagreements about how to best use it could arise.

You might not care what happens to your home when you are gone. However, if you want to set restrictions on its use for any reason—whether those reasons are sentimental or have the practical intent of reducing conflicts among multiple beneficiaries—you must use the right estate planning tool. 

Consider placing your home in a living trust that legally owns the property, with you serving as a trustee and being the current beneficiary during your lifetime. This allows you to stay in your home—and maintain control over it—while you are alive. 

When you pass away, the home does not go through probate because you do not technically own it. Instead, a successor trustee assumes legal responsibility for the property and manages it or gives it away in accordance with your trust’s terms. 

The trust terms can be highly detailed, and limitations can be set on how the property can be used. You can state that the property must be used as a family vacation home. It cannot be used for business.

You can ask that the house stays in the trust until your children are older. This way, they can remain in the home after you leave. While the trust owns the property, your terms will govern its use. As soon as the trust distributes the property, you lose all control over it.

The Best Way to Transfer Property for Every Situation

Estate planning is a personal process. It involves many factors. Each factor can have different solutions. These solutions offer unique benefits and drawbacks.

Avoiding probate is often just one part of estate planning. It may not be the best choice in every case. 

Determining the best way to pass down real property at death depends on your preferences and family circumstances. An estate planning attorney can explain each available option and help you decide what is best for your situation. 

Don't leave your loved ones with the burden of probate. Secure your legacy and ensure your wishes are honored with a comprehensive estate plan. Contact Lenny at [email protected] or call 702-852-2577 to get started. Schedule your consultation now at https://calendly.com/cpaattorney and take the first step towards peace of mind.