Thinking of buying a house? Think about an Estate Plan FIRST!
When in the home buying process is it best to get an Estate Plan? Getting a home is often the first triggering event that someone should be considering getting an Estate Plan because a home is one of the most significant assets that you will hold in your life. You’ll buy and sell your house a handful of times over the course of your life; however, while you own a home, it is likely the highest valued asset you’ll own.
In California, Estate Planning Attorneys will talk about $166,250.00. This number might seem irrelevant to you, but what this number means to Estate Planning Attorneys is that once your Estate has a value over $166,250, it’s time to get a Trust. What this threshold is referring to is the maximum value that you can have and go through the process of a Small Estate Probate. A Small Estate Probate is a cheaper and more streamlined process than your typical Probate, which is costly and takes a minimum of 6-9 months.
It is unlikely that you will find a home in California that is valued under $166,250. When you buy a house in California, you’ve probably surpassed the $166,250 threshold. In the event you pass away while you own your home worth more than $166,250, your heirs must go through a full probate proceeding costing them money and time that will come out of the Estate unless you have a proper Estate Plan in place.
The best way to avoid going through Probate is by having a Revocable Living Trust where you hold title to your property. This will streamline and simplify the process for your heirs when you pass. The question is, when is the right time to get your Estate Plan in place? Before you buy your house or after?
1. Estate Planning after buying a House
The process of implementing an Estate Plan after you have purchased a house is relatively straight forward. You consult with an attorney who will help draft your Trust documents, and establish your wishes for who will inherit specific assets. After you have created your Trust, you transfer the property into the Trust by changing the title to your assets. For a house, this would be through a Quitclaim Deed.
2. Estate Planning before buying a House
Creating an Estate Plan before buying the house will remove the extra step of changing the title. You will inform your broker and escrow agent that you have a Trust and take title under the Trust. By doing this, you will avoid any mistakes if changing the title.
The biggest issue that happens is when the house doesn’t get put into the Trust Documents because quitclaim deeds do not get filed, or you forget to include the house in your schedule of assets to your Trust. This is problematic because your Trust is essentially an empty vessel and does not help your heirs avoid Probate.
It is much easier to create your Estate Plan before you buy your house, ensuring that there are no issues by forgetting to change the title after the fact. Estate Plans can often be completed in less time than your escrow period. So, if you have put an offer on the house and realize you need an Estate Plan, contact an Estate Planning Attorney to evaluate your needs and put your Estate Plan into effect before you close on the house.
About the Law Office of Natalie A. Miller
Natalie A. Miller is licensed to practice law in California. Information presented on US laws. This article is legal information and should not be seen as legal advice. The opinions contained herein are those of Natalie A. Miller and not of any other organization. The information contained herein does not create an attorney-client relationship nor a requirement that Natalie A. Miller take you on as a client.
