Time for an Estate Planning Review? Check for 9 Common Deed Mistakes

Creating an estate plan is a wonderful thing to do for your loved ones. And it’s actually never too early to do your estate planning. Every homeowner should be confident that their intentions will be carried out, according to clear, effective documents.

So, let’s briefly go over nine common mistakes to look out for when starting or reviewing an estate plan.  

1. Never Made a Plan? Mistake #1!

Some people don’t start — either because they don’t wish to think about death, or because they’re anxious about making mistakes.

We hope this article inspires some of you to get in the mindset to sit down and make a plan. Or, to update the plan you’ve already made.

2. Forgot to Update Your Estate Plan? Whoops!

Look over your home’s deed, your Last Will, beneficiary deeds, and any estate-related documents every five years. And always do it when something happens that significantly changes your assets, or where you’ll want them to go after you pass on.

If you sell a house that you had willed to someone, do not cross out the address on your Last Will. The simplest way to update your Last Will is to formally amend it. Known as a codicil, your amendment must be notarized the same way your Last Will was, and the documents should stay together.  

Finally, be sure to let a trusted loved one know where your documents are and how to retrieve them.

3. Leaving a Deed Unrecorded? Uh Oh.

Recording a deed means filing it publicly with the home’s county Recorder of Deeds. A buyer doesn’t have to record a deed to make it legitimate, but recording is important to help keep the title clear and avert confusion.

Don’t leave an unrecorded deed around for someone else to record later. That’s a recipe for disputes after you’re gone.

Claims can affect the wrong people when the current owner’s name doesn’t appear in the records.

Pro tip: Find out if the state you and your beneficiaries live in collects estate tax, and how much you can pass without creating a tax liability in the inherited home.

4. Didn’t Review Your Deed for Accuracy? Check It Again.

Review the language of your deed. Be sure it meets the state’s legal requirements.

Remove potentially unclear terms from the title. When you’re simply clarifying, a corrective deed will suffice. Record it with the current (imperfect) deed.

The added correction takes care of potential concerns about a deed. The title company or a real estate attorney can easily handle these minor fixes. Do inform the mortgage company (if applicable) and your insurance agent of any new filing. You don’t want to take your insurer by surprise, or fall afoul of its rules.

5. Putting Your Child’s Name on the Deed? Think Twice!

Parents sometimes put their adult child’s name on the deed because they think it’s a safe, sure, and cheap way to transfer property. But you give your kids a set of ownership rights by naming them on the deed. And your kids’ financial lives could now have an impact on your home’s title.

Also, allowing adult children to inherit the home later preserves a tax break on capital gains in the home’s value. There are other tax impacts involved in transferring a deed rather than bequeathing it, so be sure to speak with your accountant on this one.

6. Thinking the Kids Want What You Do? You Know What Assume Means…

Talk about what you’re doing that impacts your family and friends. This way, you can be sure you’re on the same page, and reduce the likelihood of tensions and misunderstandings later on.

Some parents deed homes into trusts so their kids accomplish certain things to get their inheritances. This is informally known as dead-hand control.

Some parents use the testamentary trust method to control their beneficiaries’ actions through their Last Wills. Are you stipulating that certain assets shall be distributed if and when your children act (or interact) in specified ways? Be careful not to set up future disputes.

7. Forgot to Make the Will Match the Deed? Whoops!

This is a common error. If your Last Will contradicts your deed language, then which has the last word? The deed has that super power.

If you and a co-owner hold a deed with rights of survivorship, you can’t just will your co-owner’s property interest away. Your deed is going to bypass probate, as your co-owner automatically gets your interest.

Property deeded to co-owners as tenants in common, in contrast, does go through probate, and your Last Will rules.

8. Adding Others to Your Deed? Know the Drawbacks. 

As we just saw, a right of survivorship on the deed lets property pass straight to a co-owner. No need for probate or other legal documents. Many people re-deed their homes to themselves along with others who have rights of survivorship. Doing this can:

• Lead the local government to hike the property taxes.  

• Complicate any later decisions to sell or finance the home.

• Expose co-owners to each other’s debts or possible judgment liens.

Remember that the way a deed is vested controls property rights when either co-owner dies.

9. Ignoring Medicaid Eligibility Rules? Risky!

Transferring your deed can put your Medicaid eligibility at risk if you might need nursing home care in the next five years. And transferring your deed within the five years before you need Medicaid could rule out your eligibility for an extended period.

Is Medicaid eligibility potentially important to you? We have more for you here on protecting your deed and your eligibility for crucial healthcare.

Create a durable power of attorney. Then, your trusted representative can make medical and financial decisions in your interests, should you ever lose that ability.

The Biggest Mistake to Avoid…

…is putting important things off until it’s too late. So, mark some time on your calendar for estate planning.  

Note that this website is for general information purposes only. We cannot provide professional guidance for individual circumstances. Speak with an estate planning expert to protect your interests, and your loved ones’ futures. Wills & trusts lawyers help deed holders preserve healthcare eligibility, prevent tax surprises, and can keep home titles safe from costly mistakes.