Real Estate is often the most valuable part of one’s estate and can be owned in many different ways.
Some types of real estate ownership under Utah law allow property owners to choose who gets what when they die or while still alive, and can even avoid probate altogether.
Joint Tenancy
If you are married and own a home, you and your spouse probably own it as joint tenants with rights of survivorship. That means that when one of you dies, the other spouse automatically becomes the owner in fee simple of the home without the need to probate the deceased joint tenant’s estate. All you need to do is file the deceased joint tenant’s death certificate in the Recorder’s Office where the property is located. (Note that you may still need to probate your loved one’s estate because of other assets.)
Joint tenants don’t have to be married or even related. A mother and her children, for example, can own a home as joint tenants. Unless another estate planning device is in place, only the estate of the last surviving joint tenant will have to be probated when he or she dies. But beware: if you want your share to go to your heirs when you die, but you and your joint tenant don’t have the same heirs, a joint tenancy is not the right option for you.
Tenancy in Common
Tenants in common, as opposed to joint tenants, do not automatically acquire the other tenant’s interest when he or she dies. When a tenant in common dies without some kind of estate planning, their estate will have to be probated and the tenancy in common continues indefinitely with the deceased tenant’s heirs or devisees. Even though this option does not bypass the need to probate one’s estate, it ensures that one’s heirs or devisees are the recipients of this interest.
Life Estate
Another way to avoid probate of real estate interests altogether is by creating a life estate. In simple terms, a life estate is created in a deed by adding language that states that you, the owner of the home (the grantor), conveys your interest to your two children (the beneficiaries), for example, and reserves a life estate. That means that you retain the right to manage the property or live in the house but, upon your death, your interest automatically passes to your beneficiaries.
Unless an exception applies, all you need to do is file the deceased joint tenant’s death certificate in the Recorder’s Office where the property is located. However, the main disadvantage to life estates is that, if the life tenant decides to sell the house at some point, he or she must obtain the beneficiaries’ consent first.
Sole Ownership
Property can be owned by an individual (including a married individual dealing in his own and separate property), a trust or a business entity (like an LLC, corporation, or partnership). In order to avoid probate, an individual who is a sole owner of property should consider setting up a trust or a business entity. Otherwise, unless the individual has a will (which has to be probated within three years of the date of death in Utah), the property will pass to his heirs under Utah intestacy laws. Proper estate planning also protects and manages one’s property in case of temporary or permanent incapacitation.
Transfer on Death
Property rights can be transferred at the grantor’s death to named beneficiaries by what’s called a Transfer on Death Deed. This type of deed must be recorded and contain specific language identifying the beneficiaries. A TODD cannot simply state that the grantor wishes to convey all of his or her interest to “all his/her children”. The document must specifically name the beneficiaries. A TODD allows the grantor to bypass the probate process altogether and can be changed during the lifetime of the grantor.
The different types of real estate ownership above all come with implications, including tax consequences, that can be considered advantages or disadvantages depending on your particular situation. Let us help you decide what option best fits your needs. If you have any questions about how to avoid probate or wish to plan for your future and protect your investment properties or family home, give us a call today at (385) 334-4030 or send an email to info@skvlegal.com. Don’t delay. Start planning your future today!
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