Real estate ownership can unfortunately become complicated when it comes to transferring the asset at death. It is often incorrectly assumed that real property will automatically be awarded to next of kin, and this misunderstanding of the law can lead to unintended results. Here are several ways in which a person can put protections into place to ensure their real estate goes to the intended recipients.
Joint Tenancy
Joint tenancy refers to two or more people sharing legal ownership of the same property. All joint tenants have equal rights to the property, and one tenant will maintain that ownership after the other has passed away. The surviving tenant has legal ownership upon the other owner’s death, meaning there is no need to go through probate. (Probate is a legal procedure commonly used to pass assets from a deceased party to his or her heirs or legatees) Joint tenancy is an ideal option when the original owner is comfortable with holding partial ownership (and legal rights) to the property during his or her lifetime.
Designation in a Will or Trust
While a Will is an effective way to legally declare how assets should be distributed, it does not eliminate the need for probate. Choosing to only have a will in place puts the beneficiaries at risk for court challenges, time delays and excessive fees.
Unlike a will, the terms of a trust can take effect before death. For example, a trust enables an individual to transfer ownership to the beneficiaries before death. Trusts also allow the owner to leave clear instructions on when the assets are turned over, whether that be before or any time after death. Additionally, using a trust avoids probate of real estate.
Transfer on Death Instrument (TODI)
In the state of Illinois, residents can use a Transfer on Death Instrument to pass possession of property to a beneficiary upon death. This act is only applicable to real estate, and it transfers ownership of the property to the beneficiary directly and without probate. (The named beneficiary does not obtain any legal right to the property until after the owner’s death.) In estates where the only asset is a parcel of real estate, executing a transfer on death instrument may be a simpler way to assign and re-assign beneficiaries for that asset, as opposed to setting up a Trust.
Each method of distributing real estate after death has its own unique benefits. As each person’s circumstances are different, it is best to consult an attorney who is knowledgeable in state-specific laws to help determine which method will be the most appropriate.