Estate planning is a way for people to protect themselves and their loved ones. The process often focuses on choosing beneficiaries to inherit specific assets. For many California residents, the home where they live may be the most valuable property they own, which makes it an estate planning priority.
Homeowners may want to ensure that their residences go to the right people when they die. There are many different ways to achieve that goal ranging from including the property in a will to transferring it to a trust. Some people want to keep their real property out of probate court by using unique estate planning solutions.
One tactic people frequently consider is the creation of a deed to transfer their interest in the home after their death. While doing so can work in some situations, it can be a risk in others. What are some of the concerns that arise when using a deed to transfer real property after someone dies?
Not all types of deeds work in California
If there is one type of deed that people associate with estate planning, it is probably the lady bird deed or enhanced life estate deed. These unique documents give someone the option of remaining in a home indefinitely while passing the ownership interest to others. Lady bird deeds work well in states where they are legal for those who remarry with children from a prior relationship, for example. California does not recognize lady bird deeds. People who draft them anyway may not achieve their legacy goals.
Deeds could end up lost
Some people preemptively sign deeds that they then store for people to record after their passing. Such deeds can keep a home out of probate court after the owner dies or can assist with the transfer of their interest in the property to a different owner immediately after their death. Unfortunately, deeds are easy for people to misplace. Family members may not be able to locate a deed after someone’s passing, especially if they drafted the document years ago.
Deeds create fraud risk as well
The use of a deed to transfer an ownership interest can lead to misconduct and fraud. Someone who preemptively executes a deed for loved ones to record after their death could be financially vulnerable if the recipient records the deed while they are still alive. They could lose their interest in the property. Other times, the potential exists for people to make fraudulent alterations to a deed in order to undermine a testator’s wishes.
Deeds can be useful estate planning tools in some cases when they are properly drafted and stored. Discussing plans for high-value assets, like real property, with a skilled legal team can help testators choose the best estate planning tools given their circumstances. Deeds can be helpful in some scenarios but may not work for all people who own real property.
