There are numerous ways to pass your property at death. A woman with three grown daughters faced a problem about passing down the family home. She wanted to leave a home to a child who has taken care of and is closest to her. However, she also wanted to be sure that, if something happened to this youngest daughter, the house would go to her two other daughters and not the close daughter’s adult children.

With proper planning, this can be done, as described in the article “Mom needs contingency plan to pass house title” from mySanAntonio.

One way is to rely on a last will and testament. The will would state that she leaves the house to the youngest daughter, under terms of a testamentary trust inside the will. The executor would probate the will and the trust would be established at death.  The trust terms would permit the daughter to use, enjoy, and live in the house during her lifetime, as the beneficiary of the testamentary trust.

The two older daughters would be named as the secondary beneficiaries of the trust. When the younger daughter dies, the trust distributes the house to the older daughters.  The trust would also provide what would happen to the property if the older daughters are deceased.

The plan will need to be prepared by a qualified estate planning attorney. This is not a terrible process, if the will is professionally written and properly executed, includes an executor and a trustee and clear instructions about her wishes.

However, there are other options, which can also be used in conjunction.  One is an enhanced life estate deed and another is a living trust. The enhanced life estate deed specifies that the woman is retaining a life estate, that is, the right to use, enjoy and occupy her home, for the rest of her life. The document specifies that when she dies, the home goes to her youngest daughter. The owner would also want to specify that she has the right to change her mind at any time.

This approach avoids probate. However, there is a downside. If the youngest daughter dies before the mother, then the mother will need to take legal action to cancel the deed and issue a new one to the two older daughters. If the daughter outlives her mother, once she inherits the house, there will be no way to have it transferred to the other sisters in the future (unless the daughter choses to do so) and presumably the property will go to the grandchildren after all.  Clients who try to construct their own estate plans often fall into this trap, they try to rely on beneficiary designations for everything and can’t address contingencies.

A living trust provides the detailed control allowed in a will, but the trust, which must be properly created and funded, avoids going to probate. The trust would let the mother live in the home, and when she dies, the title to the house stays in trust with her youngest daughter, who is able to live in the house. However, she never becomes the owner of the house. The trust would continue to own the house. The trust would specify that when the daughter dies, the house goes to the two older daughters. She may also use the enhanced life estate deed, and have it name the trust as beneficiary at her death to ensure it goes to the right beneficiaries.

There are other considerations which affect these decisions, such as taxes, who to put in charge of the process and long term care planning.  See here for more information.  https://galligan-law.com/removing-your-house-from-your-trust/

If you have a similar situation and want to learn more, call our office today.  We will walk you through these issues and help craft a plan that accomplishes your goals.

Reference: mySanAntonio (June 8, 2020) “Mom needs contingency plan to pass house title”