Share

Madison Wisconsin's Estate Planning Blog

Tuesday, February 9, 2021

Ways to Leave Your Real Estate to Your Loved Ones (and the Pros and Cons)

Owning real estate continues to be a very popular investment vehicle for individuals and couples alike. One attractive feature of investing in real estate is that investment property can also double as a personal residence. In other cases, real estate investments may be rental, recreational, commercial, or farm properties. Whatever the case, it is important to understand that real estate can be owned in several ways, each of which has important legal consequences when it comes to leaving that real estate to your loved ones upon your death. Failing to understand how you legally own your real estate and how it will be passed on to your loved ones can lead to unintended, and often negative, consequences.

 

Outright Gifts at Death

 

Gifts In Your Will

 

Leaving real property to someone at your death can be accomplished through your last will and testament. Your attorney can help you create the proper testamentary language to direct that ownership of a certain parcel of property be transferred to your chosen beneficiary. This method is very straightforward and often less expensive than other methods. However, making this kind of gift in a will requires the person in charge of your property when you die (your executor or personal representative) to submit your will to the probate court to secure the legal right to make the transfer according to the terms of your will. Probate can be expensive, time-consuming, and open to public view.

 

It is also important to ensure that the property’s recipient knows to have the real estate appraised as soon as possible after your death so that capital gains taxes can be properly calculated in case the property is later sold.

 

Gifts from a Trust

 

Many trusts are designed to serve as a substitute for a will by directing who among your loved ones should receive certain items of property at your death, including real estate. The trust document can specify who should receive your real estate. The trustee will then transfer the property to your designated recipient according to any directions you have included in the trust document. One of the primary benefits of a trust is that, as long as you transfer your property’s title to the trust before you die, the trustee will have all the necessary power to make the postdeath transfer to your intended beneficiaries. Probate will be unnecessary, saving your estate and trust beneficiaries significant costs and delay.

 

Gifts Using Transfer-on-Death or Beneficiary Deeds

 

A growing number of states have passed laws that allow a real estate owner to record with the local land records office a deed that allows the real estate to be transferred automatically to a named beneficiary at the death of the original land owner. This method for transferring real estate outright to the person whom you intend to receive it at your death can be very simple and cost-effective. Not every state allows this type of transfer, so it is important to check your state laws or consult with an attorney knowledgeable in this area before attempting to use such a tool. It is also important to note that this type of transfer at death cannot protect the property from the new owner’s creditors. If asset protection for your loved one is an important factor, a transfer-on-death deed may not be the best solution. Typically, only a trust can provide its beneficiaries with protection against creditors.

 

Gifting Real Estate to Multiple Individuals

 

In some cases, you may want to transfer your real estate to more than one person at your death. For example, suppose you have a treasured family cabin that you and your adult children have all enjoyed for years. You may want to leave the cabin to the children in equal shares so they can continue enjoying it throughout their lives. It is crucial, however, that you carefully consider the various options for joint ownership before you decide how to pass it to them.

 

Tenancy in common is a frequently used option for joint ownership among individuals who are not related by marriage. This type of real estate ownership allows each joint owner to access and enjoy use of the entire property even though they may own only a fraction of it. However, if a joint owner dies, that person’s share will pass to their own heirs or beneficiaries rather than to the other joint owners. In the cabin example above, all the decedent’s children would have equal access and right to use the family cabin. They would also bear equal responsibility for maintaining the property and sharing in any liabilities associated with the property, such as property taxes. And ultimately, any co-owner could sell or pass on their share in the property in whatever way was in their own best interest.

 

Joint Tenancy is another form of joint ownership that, similar to tenancy in common, allows all joint owners the legal right to use and enjoy the entire property. Joint tenancy differs from tenancy in common primarily in that, when a joint tenant dies, that tenant’s interest in the property legally passes to the other joint tenants. In the cabin example, the siblings who inherited the cabin property as joint tenants could use and enjoy the property (and share in its maintenance and liabilities throughout their lives, but as soon as one of them dies, that person’s share of the property would pass to all the other joint owners, with the last joint owner to die receiving the entire property to gift or pass to anyone in any way. This situation may or may not be desirable, depending on the family dynamics. While it may be perfect for some situations, this right of survivorship can unfairly favor the youngest or naturally healthiest individual among the group of joint tenants.

 

It is also important to understand that a joint tenancy can be severed by any joint tenant through the sale or transfer of that individual’s joint interest without the consent of the other joint tenants, leading to confusion and animosity among the joint tenants if expectations are not clearly set and agreed to from the beginning.

 

Tenancy in the entirety is a form of joint ownership available only to married couples, but it is not available in every state. Where it is available, however, it can be a very useful method of joint ownership. It is very similar to joint tenancy with rights of survivorship in that, upon the death of one joint owner, the other joint owner automatically receives ownership of the entire interest in the property. However, unlike joint tenancy, tenancy in the entirety prevents one of the joint owners from unilaterally severing the joint ownership. This feature can be particularly useful when one of the joint owners is sued, because tenancy by the entirety provides unique creditor protections to the other joint owner. When one of the joint owners is sued by a creditor attempting to foreclose on the property, the creditor will typically be prevented from foreclosing, because the other joint owner’s interest in the entire property cannot be involuntarily subjected to the creditors of the defendant joint owner.

 

Life Estates and Remainder Interests

 

A life estate is a less-common, but potentially very useful, method of gifting an interest in real estate. This method is often implemented when the property is owned by a trust. However, a life estate can also be established by a properly drafted deed recorded in the local county records office. In either case, the legal document that creates the life estate specifies that an interest in the property has been transferred to a specific individual for life. Recipients of life estates have the legal right to use and enjoy the property as if it were their own throughout the remainder of their life. However, the donor of a life estate does not transfer all rights in the property.

 

For example, the recipient of a life estate typically has no right to sell, transfer, or borrow against the property, or determine to whom the property will pass upon the termination of the life estate. Those rights are reserved to the donor of the life estate. In many cases, the legal document that establishes the life estate (e.g., the trust document or the deed) will also name a third party to whom the remainder interest (the interest not included in the life estate) will pass when the recipient dies. If there is no named remainderman, the remainder interest typically reverts to the original owner.

 

A life estate can be very useful in a number of situations, including the following:

 

  • ●long-term care (when someone wants to qualify for Medicaid)
  • ●blended families (where one domestic partner or spouse wants to ensure that the other partner or spouse maintains enjoyment of the residence for life, with the remainder interest passing to the first partner’s or spouse’s children)
  • ●family farms (where one child wants to farm the land for life and the parents want the land to pass to other descendants upon the death of the child who does the farming)

 

The discussion above is only an introduction to the variety of methods that real estate can be transferred to and owned by individuals. With so many options available, transferring real estate to your loved ones does not have to be a one-size-fits-all approach. You can create a highly customized method for passing on your valuable real estate in a way that best aligns with your individual circumstances and estate planning goals. And while the variety of options available can be overwhelming at first, we are here to help you every step of the way. Give your Madison Estate Planning Attorney a call today.



Blog Categories

401(k)

AB Trust

ABLE Program

Abuse

Addiction

Adult Beneficiaries

Advancement of share

Agent

Aging

Alcohol abuse

Amendment of Trust

Annual exclusion

Annuity

Armed Service Personnel

Asset Protection

Attorney

Avoid Probate

Basis

Beneficiary

Beneficiary Designations

Birth

Business Succession

Buy-Sell Agreement

Capacity

Caregiver

Celebrity

Changes in life

Changes in tax law

Charitable Planning

Children

Cognitive Impairment

Community Property

Compensation

Conservatorship

Core Values

Corporate Trustee

Court

Creditor Protection

Creditors

Death

Debts

Decanting

Deed

Digital Estate Planning

Discretionary Trusts

Disinherit

Divorce

Divorce Protection

Documents

Driving

Drug abuse

Duress

Dynasty Trust

Dysfunctional Family

Education

Elder Law

Equal Division

Estate Planning

Executor

Fair Division

Family

Farming and Ranching

Fees

Fiduciary

Financial Power of Attorney

Flexibility

Fraud

Funding Your Trust

Funeral

Generational Planning

Gifting

Government Assistance

Grandchildren

GSST

Guardian

Guardianship

Health Care

Health Care Agent/Proxy

Health Savings Account

Heirlooms

Heirs

HIPAA

Holographic Will

House

Incapacity

Income Tax

Inheritance

Instruction

Insurance

Intent Letters

Internet

Inter-vivos Trusts

Intestacy

Inventory

IRA

Irrevocable Trusts

Joint Tenancy

Keepsakes

Kids

Law Firm

Lawsuits

Liability

Liability Insurance

Life Estate

Life Events

Life Insurance

Lifetime Planning

Lifetime QTIP

Lifetime QTIP Trust

Limited Liability Company

Living Probate

Living Trust

Living Will

LLC

Loans

Long-Term Care

Lottery Winnings

Marital Property

Marraige

Medicaid Planning

Meeting

Mental Illness

Minor Children

Money

Moving to/from a State

Myths

Newlyweds

NEWSLETTERS

Nursing Home

Oral Wills

Overseas Estate Planning

Parents

Partners

Payable on Death (POD)

Peace of Mind

Personal Property

Personal Representative

Pets

Physicians

Planning

Portibility

Power of Appointment

Power of Attorney

Predator Protection

Predators

Prenuptual Agreements

Privacy

Probate

Procrastination

Promises

Property

QTIP Trust

Remarraige

Rental Property

Restatement of Trust

Retirement Assets

Review

Revocable Trusts

Saving Money

Simultaneous Death

Special Needs Trusts

Spendthrift Tust

Spouse

Stand Alone Retirement Trust (SRT)

Storage of Documents

Storing Documents

Stress

Successor Trustee

Surgery

Tangible Personal Property Memorandum

Taxes

Testamentary Trusts

Theft

Timeshare

Title

Transfer of Assets

Transfer on Death (TOD)

Trust Administration

Trust Contest

Trust Funding

Trust Protector

Trustee

Trusts

Umbrella Insurance

Unborn Children

Unfinished Estate Plan

Update Planning

Vacation Poperty

Values

Will

Will Contests

Wishes

Year End Strategies

Young Families

Archived Posts

2021
September
August
July
June
May
April
March
February
January
2020
December
November
October
September
August
July
June
May
April
March
February
January
2019
December
November
October
September
August
July
Being Deployed? Here’s What You Need to Do
The Only Constant in Life is Change: When Circumstances Change, So Should Your Estate Plan
Beyond Wills and Trusts: 3 Documents Everyone Needs
Reconsider Outright Inheritances: How to Protect Your Heirs and Your Legacy from Bad Decisions and Outside Influences
Expand Your Cast to Prevent Chaos
Planning for Blended Families: Second or Later Marriages and Divorce of Beneficiaries
The Flexible Protection of Trust-Based Planning
Why “I Love You” Wills Really Don’t Say “I Love You”
Estate Plans for College Students and Other Young Adults: Why It’s the Perfect Time to Set Your Kids Up for Success
Your Guide to Better Incapacity Protection in Your Estate Plan
Are You Familiar With Community Property Trusts?: Learn How These Special Trusts Can Help Reduce Income Taxes
Modernizing an Outdated Estate Plan: What to do with a Confusing, Old Trust
Have You Considered a Dynasty Trust for Your Family’s Estate? Why You Should Think Twice Before Ruling One Out
What if you don’t die?: Why Ignoring the Importance of Incapacity Planning Can Have Serious Consequences
Don’t Put Off Till Tomorrow What You Can Do Today: Why It’s Time to Talk with Your Family and Your Estate Planning Attorney
Who Will Inherit Your Financial Wisdom?: Passing on More Than Just Wealth
How Tax Reform Will Impact You and Your Estate Planning
Will My Debt Outlive Me?: Your Questions About Debt After Death Answered
Planning Your Summer Vacation?: 5 Things to Consider Now
Talk to Your Family over the Holidays about Your Estate Plan
12 Crucial Insights for Protecting Your Furry Family Members
Does Your Family Know About Your Estate Plan?: A Guide for How Much to Share and With Whom
Planning for the Financial Future of a Troubled Adult Child: Your 3-Step Guide to Creating an Informed Estate Plan
Keeping the Peace After You Are Gone: Planning With an Aim Towards Building Unity
Have You Taken Advantage of the Tax Cuts and Jobs Act Planning Window?: Important Estate Planning Tips You Should Act on Now
Back-To-School Preparation: Not Just About the School Supplies- Use This Time to Revisit The Parts of Your Estate Plan That Impact Your Children Most
What Do the New 199A Regulations Mean for You?: New Choices and Opportunities for Tax Savings
Three Legal Strategies When Facing a Major Health Event: What You and Your Family Need to Know
How to Protect Your Retirement Account
2018 Midterm Elections: What Do They Mean For Your Estate Plan?: Strategic Planning Guidance in Light of the Midterm Results
Estate Planning Projects to Tackle in the New Year
Three Liability Planning Tips for Physicians You Can Use Too
June
3 Estate Planning Secrets the Wealthy Use That You Can Too!: Strategies to Enhance Your Success
Five Key Considerations for Your Estate Plan
Your Personal Property Memorandum: 4 Tips for Success
How to Coordinate Your Retirement and Estate Plans
How to Avoid a Disastrous Will or Trust Contest
Is Your Estate Plan Probate-Proof?
Want a Greater Sense of Purpose? Plan Your Legacy
What is Asset Protection and Do I Need It?
Caution: Your Traditional Asset Protection Plan Is Set Up to Fail
Your Vacation Checklist
Estate Plans for College Students and Other Young Adults: Why It’s the Perfect Time to Set Your Kids Up for Success
Does Your Estate Plan Protect Your Adult Beneficiaries?
Discretionary Trusts – How to Protect Your Beneficiaries from Bad Decisions and Outside Influences
Estate Planning Is Not Just About Money
Is Your Estate Plan Unfinished? Don’t Wait to Complete This Important Process!
When Equal Is Not Necessarily Fair
Lifetime QTIP Trusts – The Gift That Keeps Giving
One Year After the Historic 2016 Election: Strategic Estate Planning in Uncertain Times
Funding Your Revocable Living Trust to Avoid Probate
4 Tips for Avoiding a Will or Trust Contest
The Harmonious Family that Won't Fight
3 Asset Protection Tips You Can Use Now
Estate Planning for Rental Property Owners
Estate Planning is More Than Just Death Planning
The Trust Protection Myth: Your Revocable Trust Protects Against Lawsuits
Loan, Gift, or Advancement: Why the Classification Matters
What to Bring to Your First Meeting with the Estate Planning Attorney
April
March
February
January
2018
September
August
July
Not Married? You’re not alone - but you still need a plan. Estate Planning for People Living Together, Bachelors, and Bachelorettes
Are Your Documents Following the Same Script? Basics of Beneficiary Forms and Estate Planning
A Trust for Fluffy or Fido? Why Every Pet Parent Needs to Consider a Pet Trust Today
Roth IRA Conversions After Tax Reform...Still a good idea? What are the implications for your family if you don’t spend all the money?
Estate Planning When Not All of Your Kids are in the Family Business
Beneficiary Designations and a Blended Family: Why You Need to Think Before You Sign
The One Thing Every New Grandparent MUST Do As Soon as Possible
How to Fix 5 Common Estate Planning Problems
How to Leave Your Life Insurance and Retirement Plan to Your Minor Children
Financial Planning. Tax Planning. Legacy Planning. Estate Planning - How many plans do I need?!
Why Not Just Go on NoloⓇ and Create Your Own Estate Planning Documents Cheaply?
3 Things You Must Do Once Your Divorce Is Final
Protecting Your Children’s Inheritance When You are Divorced
Finding the Right Fit: Questions For Prospective Wills and Trusts Attorneys
The Biggest Threat to Successful Estate Planning
Steps For Starting the End-of-Life Conversation
Joint Tenancy Pitfalls: The ‘Simple’ Fix that Can Leave Your Family Broke
One Call You Must Make After You Buy a Home-That You’ve Probably Forgotten
3 Tips For Every New Homeowner
Declare your Independence from Court Interference!
What To Do With Your Beloved Collection
Legal Considerations When Getting Your New College Student Ready to Go
Digital Afterlife- An Estate Plan For Your Facebook Account
How an Estate Planning Letter of Intent Can Help Your Family
Kids and Investors Are Not the Only Options
Retirement Planning for Business Owners
Passing Along a Benefit, Not a Burden - Why Incapacity Planning for Business Owners is an Indispensable Component of Your Plan
March
February
2017
September
August
July
May
April
Updating Your Revocable Trust: How Many “Tweaks” Are Too Many?
U.S. Supreme Court Rules Inherited IRAs are Not Protected from Creditors
4 Tips for Avoiding a Will or Trust Contest
Three Liability Planning Tips for Physicians Anyone Can Use
Three Estate Planning Mistakes Farmers and Ranchers Make and How to Avoid Them
The Wrong Successor Trustee Can Derail Your Final Wishes
The Trust Protection Myth: Your Revocable Trust Protects Against Lawsuits
The Tragic Loss of Star Trek’s Anton Yelchin: Lessons for Estate and Legacy Planning
The Three-Year Review and The Three-Year Plan
The Shocking Truth About Asset Protection Planning
The Pros and Cons of Probate
The Perils of Promises...Marlon Brando’s Story
The Lifetime QTIP Trust: Or (How to Maintain Control of Your Estate and Keep Spouse No. 2 Happy)
The Lifetime QTIP Trust: Or (How to Maintain Control of Your Estate and Keep Spouse No. 2 Happy)
The IRS Took Half of Tony Soprano’s Estate: Don’t Fall into the Same Trap!
The Essential Legal Documents You Need for Incapacity Planning
Surprise! You Can’t Easily Disinherit Your Spouse in the U.S.
Stress Test Your Estate Plan
Sonny Bono’s Procrastination in Creating a Will Led to Years of Estate Battles
Skyrocketing Probate Fees – Another Reason to Avoid Probate Court
Revocable Trust vs. Irrevocable Trust: Which Is Best for You?
Prince’s Sad and Incredibly Expensive Mistake! (Are You Making It, Too?)
3 Powers to Consider Giving to a Trust Protector
Philip Seymour Hoffman’s Will: 3 Critical Mistakes
Parental Warning: If You Own Your Property this Way, You May Accidentally Disinherit Your Own Children
Over 70% of Elvis Presley’s Estate Paid in Taxes & Fees: How Can You Avoid the Same Trap?
Nosey Neighbor Nellie Can Find Out About Your Probate. Really.
Michael Jackson’s Estate Pulled into Seemingly Endless Probate Court Battles
Lifetime QTIP Trusts – The Gift That Keeps Giving
Is Your Estate Plan as Stale as Last Week’s Ham Sandwich? 5 Reasons to Update Your Estate Plan
March
Is a Revocable Living Trust Right for You?
Is a Payable on Death Account Right for You and Your Family?
Irrevocable Trust Decanting in 4 Steps
IRS Announcement: Estate Tax Closing Letters Will Now Only Be Issued Upon Request
Investment, Insurance, Annuity, and Retirement Planning Considerations
If You Die Without a Will, Does Your Spouse Inherit Your Entire Estate?
How to Pick a Trustee, Executor, and Agent Under a Power of Attorney
How to Minimize the (Voluntary) Federal Estate Tax with Portability
How to Minimize Legal Fees After Death
HELP! This Probate Is Taking Forever!!!
Four Steps to Stop Mail Addressed to a Deceased Person
Five Things You Need to Know About the Recently ABLE Act
Flo Jo’s Tragic Mistake: A Missing Will
5 Reasons Why Uncle Bill May Not Make a Good Trustee
Financial Firms Roll Out Form Aimed at Stopping Financial Elder Abuse
5 Reasons to Embrace Estate Planning
Estate Planning: 3 Reasons We Run the Other Way
Estate Planning Basics for Newlyweds – How to Get Prepared for the Unexpected
Escape From a Bad Trust: 5 Strong Reasons to Decant Your Trust
Doris Duke’s Trustee Bilked Estate for $1M: How Well Do You Know Yours?
Don’t Leave Your Trust Unguarded: 6 Key Ways a Trust Protector Can Help You
Does Your Estate Plan Protect Your Adult Beneficiaries?
Who’s Going to Get It: Do You Really Know the Beneficiaries of Your Dynasty Trust?
Dispelling the Top 3 Estate Planning Myths
Discretionary Trusts – How to Protect Your Beneficiaries From Bad Decisions and Outside Influences
Did you include your grandkids in your will? 5 Tips to Avoid Common Problems
Did Whitney Houston Leave Too Much Money To Bobbi Kristina?
Dennis Hopper Saves Heirs with Last Minute Estate Plan Changes
Decanting: How to Fix a Trust That Isn’t Getting Better With Age
Avoiding Guardianship When you are Incapacitated
Decanting: How to Fix a Trust That Isn’t Getting Better With Age
Who Should I Choose as a Successor Trustee
Celebrities Who Failed To Recognize Unborn Children in Their Wills: A Teachable Lesson
February
Caution: Your Traditional Asset Protection Plan is Set Up to Fail
How to Choose a Trustee
Name a Guardian for Your Child
Caution: Creditors Now Have Easy Access to Inherited IRAs
Big Bang Theory Star’s “Ironclad” Prenup Challenged: How Does Yours Compare?
Will Your Family Be Able to Find Your Original Last Will?
Ways to Avoid Court Proceedings
Are Handwritten Intentions Enforceable? Princess Diana Thought So…
An Estate Planning Checklist to Facilitate Wealth Transfer
Aging.gov: A New Resource for Older Americans and Their Families
AB Trusts – Do You Need to Get Rid of Yours?
A Powerful Exercise to Surface the Values You Want to Pass on to the Next Generation
10 Types of Trusts: A Quick Look
5 Tragic Mistakes People Make When Leaving Assets to Their Pets
5 Things Every New Mother Needs to Know About Wills
New Legislation Could Mean the End of Estate and GSTT Taxes What This Means for You and Your Family
5 Reasons to Protect Your Retirement Accounts Now
5 Mistakes Made by Successor Trustees (and How to Prevent Them)
5 Good Reasons to Decant a Trust
3 Ways to Minimize Estate Planning Fees
3 Tips for Overwhelmed Executors
3 Simple Ways to Avoid Probate Costs
3 Reasons You Want to Avoid Probate
Who Needs an Estate Plan?
AB Trusts – Do You Need to Get Rid of Yours?
How to Pick a Trustee, Executor, and Agent Under a Power of Attorney
Better to Play it Safe: Proactive Estate Planning and Cognitive Impairment
Will Your Revocable Living Trust Avoid Probate? It Depends.
Why Your Estate Planning Project Must Morph into a Process
Estate Planning Tips for Commitment Without Marraige
3 Celebrity Probate Disasters and Tragic Lessons
3 Examples of When an Irrevocable Trust Can – and Should – Be Modified
January
2016
December
November
October
September
August
July
June
May
April
March
February
January
2015
December
November
October
September
August
July
June
May
April
March
February
January
2014
2013
2012


Nennig Law Offices, LLC assists clients in Madison, WI and throughout Southern Wisconsin including Verona, Middleton, Sun Prairie, Cross Plains,Sauk City, Belleville, Waunakee, Mount Horeb, Oregon, Black Earth, DeForest,Monona, McFarland, Stoughton, Cambridge, Deerfield and Fitchburg.



© 2021 Nennig Law Offices, LLC
6418 Normandy Ln, Ste 225, Madison, WI 53719
| Phone: 608-661-4333

Estate Planning | Asset Protection | Business Succession Planning | Special Needs Planning | Planning for Children | Advanced Estate Planning | Probate & Estate Administration | Estate Planning for High Net Worth Individuals | Estate Planning with Wills | Trusts & Estate Planning | Estate Planning for Non-Traditional Families | Estate Tax Planning | Estate Litigation | Guardianships | Pet Trusts | COVD-19 | Who We Are | Becoming A Client

Attorney Website Design By
Zola Creative