No homeowner should die intestate. In plain English: Every homeowner needs a will.
By now, everyone knows life is fragile. Nobody has forever and a day to put an estate plan down in writing.
And if you do leave things hanging, and you do pass away without a will, or without some combination of a will and other instruments to convey property, you’ll leave assets to be distributed under the state’s intestacy laws. States try to send everything to your closest relatives, and if you’re single without children, the state will contact siblings and so on, and pass your property to them. That might be OK with you. But if you’re like most homeowners, you’d prefer to decide for yourself.
If you’re a parent, it’ll be hard for your family to agree on what to do without your written guidance. You also need a will to bequeath assets to non-family members or nonprofits. You need a will, too, to explain why you are not giving your home to a close family member if you choose not to. Otherwise, you might be setting up a will contest after you pass.
When a person’s wishes are logically thought out and expressed through a will, though, messy scenarios are far less likely to unfold.
Yes, Your Home Can Be Passed Along Through Your Will.
For simple estates, a will is an effective way to bequeath your home. Yes, property passed through a will must go through probate. Yes, that process takes several months. But fear not. The court process ensures clear title transfers, overseen by a probate judge.
And yes, probate is costly. There are appraisers, lawyers and CPAs to pay, fees for the courts and commissions for executors. Yet these payments can be partially offset by tax advantages when property is left through a will.
If you give your home away during your life, for example, to your adult child, and the home has appreciated in value during the time you owned it, that taxable capital gain carries over to your child. (Capital gains taxes, like other taxes, can go up.) But if you pass the home through a will (as with a living trust), you’re giving your beneficiaries the advantage of a stepped-up tax basis under current law. The recipient of the house need not carry over your profit and possibly owe taxes on it. Long-time homeowners might therefore leave their homes through wills rather than passing them along during life.
In short, a will is a perfectly valid, beneficial vehicle to pass a house along. And most anyone can write a will at home. Of course, your home is valuable, so be sure your estate is in good hands by naming an executor in your will. If possible, prepare your named executor for the process. Courts allow executors a fair amount of decision-making discretion when following a will, so it’s important to name a responsible executor — optimally, one who knows you well. The person inheriting from you can be your executor.
Pro tip: Depending on the state, probate may take 6 months to a year, and can take longer for complicated estates. But some states provide a simplified probate process for surviving spouses and life partners, or for relatively modest estates. Check with your county probate court for details and be sure to let your executor know if your estate is likely to qualify.
What Happens If the Home in Your Will Has a Co-Owner?
Is a co-owner — your spouse or someone else — vested with rights of survivorship on your house deed? Then you can’t pass your house through your will; the will’s instructions will have no effect. The co-owner(s) automatically receives your interest, by virtue of survivorship rights, once you pass on. Similarly, if your home is vested as a tenancy by entirety, it passes to your co-owner without probate.
☛ Here, we explore how your property is vested on the deed, and how the vesting can be changed during your lifetime.
Speaking of joint ownership, you might wonder if you should you just add your beneficiary right onto the deed now. That way, conveyance is automatic and completely taken care of before you’re gone. If you’re thinking of adding someone to your house deed, be prepared to share ownership and any big decisions about your home with a co-owner. Think carefully before adding someone to a title by conveying a deed to both of you.
You Pass Away and Leave the House in Your Will. Now What?
When your will is actually put to the test, how will your directions play out? Under the law, whoever has or retrieves your original will must promptly file it with the probate court upon your passing. With the court’s authorization, the executor you’ve named in your will represents you. The boundaries of your executor’s authority depend on the instructions set forth in your will (so, be specific!) and by the probate court.
The executor performs an inventory, which typically includes a home appraisal. The executor pays off your taxes and debts. After a period of publicizing the estate and allowing creditors the required time to make claims, your house can go to the named beneficiary, or the executor may sell it to pay off your debts.
Indeed, your will itself can direct the executor to sell. Especially if you line up more than one beneficiary to receive the value of your home, it’s easier to sell the home and divide the proceeds in probate — what remains, that is, after paying the mortgage and closing costs — than for beneficiaries to decide how and when to buy each other out later.
Another reason to sell the home during the probate process? If you still owe something on the mortgage, the lender will likely demand a loan payoff from your estate. In most cases, that means selling the property for its equity value.
The court must authorize the listing and sale. The court-authorized transfer of real estate occurs through an executor’s deed. Under state law, the executor’s deed provides the name of the executor and a statement of conveyance of the property, pursuant to the will and following probate, on behalf of the deceased. It includes your home’s legal description. The heirs and executor must sign the deed, which is witnessed, notarized, and recorded at the home’s county recorder’s office.
What If Your Will Is Nowhere to Be Found?
After you pass away, someone will look for a will. It’s up to you to make sure the search is fruitful.
A safe deposit box is not the best place for your original will. The bank might let a relative open the box to retrieve the will, but the court might have to produce an order for this. You can leave your will with your lawyer — but this, too, can cause difficulties when you’re not around to say who the lawyer is. This is why the local county paper occasionally publishes legal notices titled “Searching for Jane Doe’s last will and testament…”
Don’t be Jane Doe. Rather than create a time-consuming will hunt, write your will, and leave it where it will be found. A copy for verification can be placed with your attorney or in a safe deposit box. Discard revoked wills and delete your previous estate plans from your computer.
If your will is nowhere to be found after you pass, despite the obligatory good-faith search, the court will consider you to have died intestate.
Where There’s No Will, Is There a Relative?
If no valid will can be produced, your estate has no executor. The court will assign an administrator to tie up all your loose financial ends. If you have no surviving spouse or domestic partner to be your personal representative, the state will contact other heirs (relatives) and ask them to step up. If no one does, or if distribution becomes contentious, the heirs might need to pay a neutral accountant or lawyer to administer your estate.
By default, your assets pass to the heirs who are located when the administrator goes down the list of relatives by the state’s order of succession. If you pass without children or a spouse or registered domestic partner, your nearest blood relatives will be sought. Friends, no matter how close, are left out under the laws of many states. If no heirs can be found at all, your assets could escheat to the state.
If potential beneficiaries can be found, someone might attempt to prevail upon the probate court for special consideration. Probate courts have legal mechanisms to go around the rigid intestate succession laws in exceptional cases, where strong reasons indicate an asset should go to a particular person.
Often, heirs find it practically impossible to agree on what’s fair and reasonable. A valid will can avert a situation that embitters your heirs and creates unnecessary legal struggles. In times when your heirs might already be facing economic stress, we can’t overstate the importance of dying testate — leaving a valid will.
To-Do List: Creating Your Last Will and Testament
You can write your own Last Will and Testament, following your state rules on valid wills.
Wills are best printed out and signed, even if you live in a state that allows holographic (handwritten) wills. Your state bar will have samples of correctly drafted wills that meet your state’s legal requirements.
Bequeath your home at the stated address to the named beneficiary, including that person’s full name and contact information. In another paragraph, you’ll name the executor responsible for distributing the value of your home and other probate assets. Also name a back-up executor in case your preferred executor is not available. Include the witness and notary acknowledgement section on the last page. (Preferably, include them even if they are not required; this will make probate easier.)
Then sign and date your will, in front of two witnesses who also sign. Setting up an appointment with your local bank manager is a simple way to have three people together with you in one room. Usually, there is no fee for account holders. The notary will witness the signing, and acknowledge the will. In some states, notaries can even notarize your estate planning documents remotely, using state-authorized webcam technology, rather than in person.
As the dynamics of your life change, you can always change your mind and write a new will. Be sure to adhere to the same formalities you used in your existing will, such as witnessing and notarization where required.
Set aside some time to protect the value of your home beyond your lifetime. Help and support those you care about, by writing your will.
Important note: Deeds.com offers this article to our readers as a public service. Although the information here addresses legal matters, it is not legal advice. There are significant differences among personal situations; and estate and tax laws vary over time and from state to state. That’s why it’s important to seek your own attorney for case-specific guidance as you consider the best estate planning options for you and your beneficiaries.
Photo credit: krakenimages, via Unsplash.