Real Estate Transfers at Death Oct. 2018

REAL ESTATE TRICKS AND TRAPS:

I bet you can’t guess how many ways there are to transfer real estate at death. You can do it with or without a will, with a defective will, with a tenancy by the entirety, with joint ownership with survivorship, with a muniment of title, holographic will and finally my favorite, a revocable living trust.Which way is best for you?

1. With a will. With a will, the property goes to whoever you specify in the will. Of course, the will must be approved by the Probate Court, which means the Executor is subject to the Probate Process. The Executor must follow the Probate Court’s rules and procedures. This takes time and money. Clients are never happy with the Probate Process.

2. With a will, without full Probate. Muniment of title. 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. A recent client was very pleasantly surprised to find out how easy this was.

3. Without a will. In Tennessee, if you die with no will, things get worse for your family. State law controls and the Probate Court supervises the transfer of your property, so your family is subject to Probate requirements. In this case, the Court appoints an “Administrator” to manage the estate instead of an Executor. Your real property is inherited by your heirs according to state law. For example, if you are married with one child, the property goes equally to your surviving spouse and child. If the child is a minor, the Court will appoint a guardian. This situation is much easier with a good lawyer, which is where I come in.

4. Without a will, using Affidavits of heirship. If the decedent has only a few heirs, this is not too bad. I establish that the heirs own the decedent’s real estate by preparing sworn “affidavits of heirship.” Signed and sworn by a friend of the decedent this document proves that the heirs are the sole heirs and therefore own the property. I file these with the Shelby County Register. The heirs can then transfer the property. You don’t need a deed.

5. Tenancy by the entirety. 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?

6. Joint with right of survivorship. This is similar to the tenancy by the entirety but the property is not owned by spouses. Bank and brokerage accounts can also be set up this way.

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, so it is the same as With a Will, 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. Defective will. Unless your will states that it revokes prior wills it will be read together with the previous will. Very Confusing! We could end up in litigation here.

9. Revocable Living Trusts (“RLT”). I advise deeding property into your RLT in most situations.   Then Probate is not required when you die because you are not the owner. This likewise avoids Probate on property in other states. Furthermore, all the other advantages of RLT’s are available so you can make sure your family is taken care of.

This article gives you just a taste of what happens to your assets at death. Do your family a favor and plan your estate. 

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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