Becoming a homeowner is a huge accomplishment – but it also comes with a lot of responsibilities. One of those responsibilities that may not be immediately apparent is the need to create an estate plan (or update the one you already have).
Not only is a home a very significant asset generally, it’s often the biggest investment that people assume, and the number one thing they have to leave behind to their heirs. Without an estate plan in place, you’ll have no voice in what happens to yours.
What are the benefits of having an estate plan when you own a home?
Ultimately, how you decide to dispose of your assets will depend on the specifics of your situation and your goals, but here are the biggest reasons you should consider putting your estate plan together right away:
- You can decide what you want to happen with your house after your death. You can leave it to a specific person, such as your spouse (if they don’t have a joint tenancy with the right of survivorship), your child or even a friend – or you can divide ownership rights among multiple heirs.
- You can also specify how the house should be used. With a careful arrangement that puts the house in a trust, you can dictate whether the home should be given over to a specific person’s use (through, for example, a life estate), rented out for the benefit of your heirs, sold so that its value can be divided or used in another way.
- You can avoid potential conflicts among your heirs over the house. If you don’t have a clear plan for your house, your heirs may disagree on whether to keep it, sell it or share it. This could lead to legal disputes, emotional stress and costly mistakes that destroy any legacy you hope to leave behind.
- You can reduce the tax burden on your heirs. Depending on the situation, your heirs may have to pay estate taxes, inheritance taxes or capital gains taxes on the house. By planning ahead, you can use various strategies to minimize these taxes, such as creating a trust, gifting the house during your lifetime or using a transfer on death deed.
- You can protect your house from creditors and lawsuits. If you have outstanding debts or liabilities, your creditors may try to claim your house after your death. Similarly, if your estate is sued for any reason, your house may be at risk of being seized to settle the claim. By transferring your house to a trust, you can shield it from these threats.
Seeking experienced legal guidance can help you make sure that your estate plan is properly drafted and aligned with your intentions.
