Here is the second video in a series of Life Planning topics around Estate Planning, Wills, Trusts and POAs from our CEO Warner Lewis III.
When you buy a home, one very important factor to consider is how you take the title to the property. If you buy the home in your name and you become incapacitated or pass away, the property will likely have to go through Probate before it can be distributed to your Heirs. Probate is time-consuming and expensive, and many people set up a Living Trust to avoid the costs and delays of Probate.
Often, real estate is purchased by more than one person. Homes with multiple owners can be titled in Joint Tenancy with or without Rights of Survivorship, as Tenants in Common or as Community Property with or without Rights of Survivorship. When the deed includes rights of survivorship, the surviving owner inherits the deceased owner’s share entirely, without probate. That said, if the survivor owns the property in their own name, the house will likely have to be probated before going to ones’ heirs. So, while ‘Rights of Survivorship’ avoids Probate at the first death, steps must be taken by the survivor in order to avoid Probate at the second death. Beneficiary Deeds are sometimes used to avoid Probate at the 2nd death. But many of the protections and benefits that a properly drafted Living Trust can provide are lost.
What if you purchase a rental property? If you own the property in your own name and a tenant or their guest accidentally slips and falls on the property, they would sue the owner of the property for damages. And if they sue the owner personally, there’s no limit to what they could be awarded in damages – up to everything the property owner possesses.
One way to limit one’s personal liability is to own the rental property in a properly drafted and administered limited liability company, or “LLC”. If the injured party sues the LLC, one’s personal liability is limited to the contents of the LLC – the property itself, not everything you own.
These are some of the moving parts you may want to consider when buying real estate. We’d be delighted to discuss your circumstances and explore some options that could produce a better outcome for you in the event ‘something happens’.
Give us a call at 877-438-7878 for a no-cost, no-obligation consultation. Click here Life Planning Inc. for more information on a wide range of Estate, Business and Asset Protection Planning solutions tailored to meet your unique goals and circumstances.