Whether you just purchased your first home or you moved into a new home, that is a perfect time to consider, or re-consider, your estate plan. Particularly in California, your home may be one of the most valuable assets in your estate when you pass away. Ensuring that it passes how you want, to who you want, and when you want, can be achieved through the preparation and, in some cases, update, of your estate plan.
When you pass away, your property will be distributed based on the type of estate plan you have, if any, and based on how your property is titled. If you have no estate plan or if you have a will, then your real property will be distributed through the probate process. Probate is the court-supervised process of estate administration. Distribution of property is the final step in administration. Further, probate is a public process, can be costly, and can take up to one year to complete. In Los Angeles County, probate can take 1-2 years to complete on average.
If you have a living trust, your estate can be distributed informally, outside the supervision of the court. Additionally, a living trust provides for further options regarding distribution of your property. For example, you can keep your property in a trust to be managed for your beneficiaries after you pass away rather than distributing the property to them outright in one lump sum. Further, if you develop an incapacity, such as no longer being able to make decisions as to your finances and health, the trust provides for a person of your choosing, to step into action and manage the property owned by the trust, such as the house.
If you own real property, you want to review how your house is titled. There are typically four options: (1) in one person’s name, individually, (2) two or more individuals as joint tenants, (3) two or more individuals as tenants in common, or (4) spouses owning the property as community property with right of survivorship. If your property is titled as in Options 1 and 3, your house will go through probate if you do not have a trust.
If your property is titled as in Options 2 and 4, the house will pass to the surviving owners, but, after that remaining person passes away, the property will go through probate unless it is owned by a trust. If you own real property or are in the process of buying property, knowing how your property is or will be titled is important in understanding how the property will be distributed upon your death.