The chief goal of estate planning is to ensure assets are passed efficiently to loved ones, are used for the right purposes, and the tax due on such distributions is minimized. For many Americans, the value of their house is on of their largest assets, so it is important that it gets passed along to family in the manner preferred by the owner. The biggest question when doing estate planning for a house is determining whether it is a probate or nonprobate asset. Probate asset are those that will be distributed according to provisions of a will. Nonprobate assets are distributed outside of probate, so the distribution provisions of the will do not govern such assets. This is important to know as if a will provides who is to receive a house, but the home is nonprobate property, those intentions can be frustrated and result in unmet expectations.
The most common way for a home to be nonprobate property is for it to be titled “joint tenancy with rights of survivorship.” When property is titled as such, the property of one joint tenant becomes the property of the remaining joint tenants on death. Joint tenancy is common between spouses, and is usually preferred because the surviving spouse owns the property on death of the first spouse. Joint tenancy can also be found in situations other than marriage, such as when a parent provides financial assistance for one of their children to purchase a home. In this situation, the joint tenancy may not produce the desired outcome on the death of the parent, as the property will be distributed in total to only that one child.
As the exact title of your home can get lost in the shuffle of a real estate closing transaction, it is advisable to check the deed before completing estate planning.