Planning to leave your home to your heirs

Determining what will happen to your belongings after you die is an unpleasant but necessary task. This preparation ensures that your assets, ranging from your bank account to your prized antique furniture, end up going to the people you want to benefit from them.

For many people, their home is the most valuable asset they own. Leaving real estate to your heirs can also be a complicated process, so you'll want to make sure you plan accordingly.

While it is easy to put off estate planning until you're older, it's best to start as soon as possible. The American Bar Association says death can unexpectedly affect young or middle-aged families, and that your survivors may not be adequately provided for if you do not leave a will or trust behind. Estate planning can ensure that your wishes are clearly articulated and carried out.

Real estate is often left to an adult child or grandchild, and might be divided up among several heirs. Once you've selected who will receive the property, it's important to discuss your plans with these recipients. The legal site Nolo says this will keep your heirs apprised of your plans and avoid any unpleasant surprises.

By including your home in your will, you can stipulate exactly who should benefit from the asset. Charles Allen Stambaugh III, a tax attorney in Lancaster, Pa., says this can clarify whether you want the home to stay in the family or be sold.

While dividing the interest in a property evenly among beneficiaries might seem fair, it can also lead to unexpected complications. For example, one beneficiary may want to move into the home, while another might want to sell it and split the proceeds. Discussing the issue with your beneficiaries can lead to an amicable resolution; one beneficiary could simply buy out the other beneficiaries' shares in the property to take sole possession of it.

Establishing a will also lets you delegate responsibilities to certain heirs. Jamie Wiebe, writing for Realtor.com, says you can choose an executor to oversee the disposition of your estate after your death. If you don't take this step in your will, an executor will have to be decided in a probate proceeding.

An outstanding mortgage balance can cause some complications in passing on a property. Brad Wiewel, writing for Credit.com, says any debts you hold at the time of your death need to be paid before your estate can be settled.

If you are still making mortgage payments, make sure your beneficiaries have a plan to avoid a default. Justin Pritchard, writing for the financial site The Balance, says beneficiaries, a surviving spouse, the executor of estate, or any other party can continue to make payments to your lender to prevent a foreclosure process.

There are several options your beneficiaries can take to resolve a mortgage after they take possession of the home. In addition to simply selling the property, they can also opt to refinance the loan or pay off the mortgage with any assets they have on hand or receive from your estate, thus owning the home free and clear.

Review your will regularly to keep it up to date. Wiebe says you'll want to change your arrangements if a beneficiary dies, if their own circumstances change, or if your relationship with them sours.

Another option is to transfer your home to a living trust. This serves as something of an intermediary step, allowing you to use and benefit from your assets while you are still alive but transferring them to your beneficiaries after your death. Stambaugh says this avoids the probate process, which can save you time and money.

Living trusts will have a trust document, which has a similar purpose to a will. This document identifies beneficiaries and determines how your estate will be distributed after your death. Pritchard says you can also designate a trustee to oversee this process and avoid conflict among beneficiaries.

One drawback of a living trust is that any outstanding debts must be resolved before your home and any other assets in the trust can be transferred to your beneficiaries. You'll also need to set up the trust in a timely manner, since any assets not transferred to the trust before your death need to be probated.

If a beneficiary is comfortable with assuming some responsibility for owning your home, you can update the deed to include them. This can be especially helpful if your spouse is not currently on the deed, since it will make transfer of the home easier.

If the deed specifies "transfer on death," you own the home outright until your death, at which point it passes to any beneficiaries you name in the deed. When the deed includes the words "joint tenant with right of survivorship," ownership of the home automatically transfers to any other co-owners on the deed after your death.

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