Real Estate Planning Oct. ’18

Less than half of Americans have a will or a trust. Read my July WealthWISe for a really short and understandable overview of estate planning and why you need it now. Now for some surprising information about real estate.

REAL ESTATE TRICKS AND TRAPS:

I bet you can’t guess how many ways you could transfer real estate at death? Here they are. As you read, ask yourself which way is best for you?I hear that less than half of Americans have a will or a trust.

1. Tenancy by the entirety. I hear this all the time, “Well I don’t need estate planning. I own everything with my spouse.” Wrong! Property that you buy with your spouse is held as “tenants by the entirety.” If either of you die the survivor owns the property. That is fine when the first spouse dies, but what happens after the surviving spouse dies?

2. Joint with right of survivorship. If the deed says Joe and Jerry who are not spouses, own “Joint with right of survivorship” it works much like the tenancy by the entirety. Bank and brokerage accounts can also be set up this way.

3. With a will. With a will, the property does to whoever you specify in the will. The will must be approved by the Probate Court, which means it must be properly drafted and witnessed and is subject to the Court’s rules and procedures.

4. Without a will. In Tennessee if an individual dies with no will, hisreal property is inherited by heirs according to state law. In the simplest of situations, like you have one adult child, this situation can be easy enough. For example, I can prepare “affidavits of heirship” executed by an acquaintance of the decedents proving that the children are the sole heirs. I can file them with the Shelby County Register to establish the heirs as owners so that they can transfer the property. The deed does not have to be changed.

5. Defective will. Unless your will states that it revokes prior wills all the wills are read together. A badly drafted will can be a nightmare.

6. Muniment of title. With a will, without Probate. If an estate contains nothing but real estate, I can file the decedent’s will with the Probate Court but not open a Probate estate. The will is called a “Muniment of title,” and it acts like a deed to pass the home to the beneficiary named in the will. This saves most of the cost of probate.

7. Holographic Will. A holographic will is one in which all of the material provisions are in the person’s handwriting and with his signature. It is valid under Tennessee law, but I advise against it. If you have ever had a misunderstanding as the result of a poorly drafted text or email, you can just imagine how difficult it could be to interpret a ten year old will in handwriting when no one knows what the writer’s intentions were. My father made one of the largest fees ever, hundreds of thousands, in a lawsuit trying to interpret a holographic will.

8. Revocable Living Trusts (“RLT”). I advise transferring property by placing it into an RLT except in really simple situations (like you have one adult child). If property is transferred into your RLT, Probate is not required when you die because you are not the owner. It also avoids Probate on property in other states. More importantly, all the other advantages of RLT’s are available, so you can provide for your own incapacity and for minor heirs and for so many other things to make sure your family is taken care of.

About Wis Laughlin

I help clients with tax preparation and IRS representation, estate planning, and complex contracts, including LLC's. As a former IRS tax attorney in their National Office. Law.com picked Wis in 2017 and several prior years as one of the Top Tax and Estate Lawyers in Tennessee. I am your advocate, not your accountant. I don't tell you what you can't do. I show you how to do it.
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