#RichLifeLawyer Show 030: Estate Planning and Your New Home

I get asked questions about home ownership and estate planning all of the time.

One of the common questions centers around the belief that if and when one purchases a new home that estate planning changes should be made.

The answer, as always, is that it depends (and if any attorney tells you you should do something, they are imposing their own values on you).

When it comes to the ownership of your home, your primary residence (assuming it is Washington State), there are essentially five courses of action you can take to incorporate it into your estate plan.

1. Do Nothing

If you already have an estate plan in place and it distributes your property in a way that continues to meet your estate planning goals (i.e. you plan on giving everything to your spouse and then your kids so all you are really doing is adding a house to the pie) then you may just want to do nothing.

The only downside here is the potential for a full blown probate (a topic for another email).

Advantage: step-up in basis.

Disadvantage: probate (possibly); no control over specific distribution of home (i.e. home likely liquidated); loss of control after death.

2. Will Codicil

If you want to do something specific with the house and you don’t want to reconfigure your entire will, you can add on a codicil specifically distributing the house.

Advantage: step-up in basis; specific distribution of home.

Disadvantage: probate (possibly); loss of control after death.

3. Transfer on Death Deed

You can give away your real estate just like you give away life insurance proceeds, bank account balances, and investment accounts – with a beneficiary designation, AKA transfer on death deed.

A transfer on death deed is a real estate instrument that tells the world that when you die the property interest should be transferred to the person named in the deed.

Advantage: no probate; step-up in basis.

Disadvantage: no control over what happens to the property.

4. Re-Title in Name of Your Trust

If you have a trust already created and the directions of the trust are sufficient for maintenance and distribution of the house after you pass away, you could simply retitle the house into the name of your trust. Then, as with all of your other trust assets, the terms of the trust control.

Advantage: no probate; step-up in basis; control; privacy

Disadvantage: none

5. Get Creative to Take Advantage of the Investment, Tax, and Estate Planning Strategies Available for Your Home

I’m going to leave this as a bit of a cliff hangar and discuss further in a later email. Just know that this fifth strategy isn’t often a consideration for a first home purchase.

The strategies in this bucket are used for retirement planning and estate tax planning (which often concludes with the homeowner transferring complete ownership to someone else).

Just know that there are more creative options out there, if and when the time arises to begin considering them.

That’s it for this week. Hope you are having a great one.

Talk to you soon.

Cheers,

Christopher Small

P.S. I’m hosting a FREE webinar: How to Create Generational Wealth for As Little as $50/month (and how to keep your kids from blowing it all) this Thursday. To access the report click here.