For most of us, buying a home is going to be one of the biggest financial and personal decisions we ever make – and it’s going to have an impact on many aspects of our lives, for years down the line. When it comes to real estate, it’s always important to remember that the decisions you make in the here and now can have long-term implications for your future, particularly when it comes to important considerations like planning for estate transitions.
Planning for the Future of Your ‘Forever Home’
Many of us tend to use the term “Forever Home” when we describe a house or condo. When someone says that a property is going to be their “Forever Home,” they’re saying that this is the spot where they plan to put down roots, create a life, and make memories for years, or even decades, down the line. After all, buying a home is a way to make a key investment in your future. It’s a way of shoring up your financial health and stability, while also making decisions about what kind of life you’re going to lead.
This is all exciting, optimistic stuff. In fact, it can be so easy to think about the present that, in some cases, we tend to put off planning for the future – until it’s too late.
For instance? What happens to your home in the unfortunate event that you fall seriously ill? Who do you want to take possession of the home when you pass away?
These are important questions to ask, no matter what stage of life’s journey you may be on.
Factoring Real Estate Into Your Estate Planning
More often than not, real estate is going to be one of the most complex and important pieces of the puzzle when it comes to estate planning.
The earlier you get a handle on all of your options and resources, the better prepared you’ll be to ease the transition and support your family in a difficult moment down the line.
Having a solid estate plan in place can help save your loved ones from serious stress and confusion, protect their financial well-being, and help ensure that your wishes are followed when it comes to your most valued assets, including your real property.
After all, as we’ve noted already, your home is an incredibly crucial part of not only your legacy, but your family’s lifestyle. When it comes to estate planning and distribution, this can be a complex asset due to a number of different factors – the legal restrictions and rules that must be planned for, the financial hurdles and advantages that must be taken into account, and, just as importantly, the emotional strain and feelings that inevitably surround this important piece of property.
Fortunately, at every step of your journey – from the way you put your initial purchasing paperwork and documents together, to the actions you can take as a long-term homeowner – there are ways to help factor real estate into your estate planning efforts.
One of the most important things to get a handle on is the various mechanisms you can use as a homeowner to transfer ownership, as part of your estate plan.
There are numerous courses of action available, depending on your unique wants and needs. In Chicago, some common estate transition mechanisms might include:
Passing the Home Down Through Probate
Homeowners can use a will to pass down ownership of real property to a new person or party. This can be a fairly straightforward option for many parties. However, it’s also important to keep in mind that using this mechanism means that your home or real estate holdings will be entered into probate, a process that can ultimately prove slow, costly, and inefficient, while also allowing room for new claims or disputes to crop up – potentially leaving your loved ones in limbo for weeks or months at a time. There are, however, transfer options that allow real estate to bypass probate, including:
Establishing Co-Ownership (Joint Tenancy With Rights of Survivorship)
In most cases, property that is owned jointly, with clearly established rights of survivorship, does not go through probate. Instead, this arrangement means that the deceased’s share of the ownership passes automatically to the listed surviving co-owner automatically at the time of the deceased’s passing.
This set-up is known as joint tenancy with rights of survivorship, and it is different than tenancy in common. In Illinois, assets owned through tenancy in common do not typically bypass probate. Instead, the deceased’s share is distributed to their chosen beneficiaries as directed in their will, rather than transferring immediately to the surviving owner.
We have more insight on the distinction between tenancy in common and joint tenancy – as well as a third designation, tenancy by the entirety – available on our blog, here.
Creating a Trust
A common estate planning mechanism is to create a revocable trust, as this can help easily transfer property outside of probate.
When you create a revocable trust, you place your assets and property in the care of a trust, which will most commonly be overseen and managed by you during your lifetime, and then by a designated trustee at the time of your passing. The trustee manages the care and distribution of the assets placed in the trust for the benefit of your heirs or beneficiaries.
There are a few key things to remember when it comes to trusts. For instance? Bear in mind that this process can be complex, and you will likely need to invest some time and effort in taking steps to establish and safeguard your trust – including setting up special provisions, and ensuring that your plan is fully in compliance with state and local laws.
Using a Transfer-on-Death (TOD) Instrument
In Illinois, it is often possible to transfer real property by means of a transfer-on-death, or TOD, instrument, allowing to pass on the asset to a named beneficiary, without having to enter probate. When you set up a transfer-on-death instrument, you still have sole control over the asset, and can use it as you see fit during your lifetime. After your passing, your stated beneficiary can claim the property directly, without having to go through probate.
Want to Keep the Conversation Going?
Curious about any aspect of real estate law in Chicagoland? Want to talk about all the ways that your real estate transaction can significantly affect your long-term financial goals, including tax liabilities, getting access to cash when you need it, simplifying estate transitions, and more? Don’t hesitate to get in touch with the attorneys and staff of the Gunderson Law Firm to keep the discussion going.
At the Gunderson Law Firm, our experienced team handles many different aspects of real estate law, including purchases and sales, exchanges, mortgage conveyancing and advice, asset protection planning, trusts, wills, estate planning, and much more.
The Gunderson Law Firm possesses the expertise and insight necessary to help you find effective solutions tailored to your unique needs – all reinforced by years of experience and long-term connections throughout Chicago’s real estate, title, finance, and insurance industries. Drop us a line to learn more or to schedule your free initial consultation.