Okay, put down the remote and give me 5 minutes. We need to talk about Estate Planning with your home and possibly other real property. Would you like the Court to take away your home; would you prefer to die in a lonely nursing facility and not in your home; would you care that a judge, who you don’t even know, decides who gets your home at your death; would you want your children to pay extra, and unnecessary, property taxes on your home as part of their inheritance?

If you answered “yes” to any of these questions, stop reading now, gently pick up a phone and call the psychiatrist hotline. You need that more than spending any more time on this blog. Seriously though, there are some things we need to discuss in the few minutes of time you will allow in your busy day to SAVE YOUR HOME.

Estate Planning with your home:

1. Transfer title to a Living Trust to avoid Probate and other Court proceedings. If you don’t a judge (and how many do you know personally?) will gain jurisdiction over your kingdom.

2. In your Living Trust and Advanced Health Care Directive, specifically state that you wish to be cared for at home during incapacity and through your dying days, AKA daze. Have you visited a typical nursing home lately? If not, put it on your bucket list “to do.” In most cases, it is not a pleasant experience. So why are you not stating in detail in your Estate Plan that you want to die in your own surroundings, at home?

3. If a particular child is to receive your home at your death, have you indicated that in your Estate Plan? Why not? You should, you know. Why? Because it will save your child property taxes. In California, we have something called the Parent-Child exclusion which will also apply to a grandchild if the son or daughter/parent of the grandchild is deceased. This exclusion of reassessment of property taxes applies to the home (100%) and $1 Million to other assessed real property. So, let’s take a look at a hypothetical.

Dixie and Dud have two children, Donna and Doug, to whom they are leaving their entire estate in two equal shares. Donna lives in San Diego and loves her parent’s home. Doug lives in Northern California. The home is valued at $800,000 and the balance of the estate is valued at $700,000, including an IRA.

If we leave the estate in two equal shares and Donna purchases one-half of the home from Doug, she will only get an exclusion from property reassessment on one-half of the value of the property. The other one-half will be assessed at present day value.

If, however, ARE YOU LISTENING, we amend the Trust and specifically bequest the home to Donna, she will obtain a 100% exclusion from reassessment. Why? Because the transfer will occur from your Living Trust (parent) to Donna (child). If she obtains one-half of the home from brother, Doug, this fact does not satisfy the Parent-Child transfer exclusion. As a result, you just saved your daughter mucho moolah especially if the home has been owned for many years. Donna gets the home valued at $800,000 while Doug is designated the beneficiary of the IRA and other Living Trust Assets valued at $700,000. To equalize the distribution in the Living Trust provisions and depending on the date of death values, Donna will pay the Trustee X dollars to be distributed to Doug by the Trustee.

Other Real Property and Estate Planning

I recommend that you transfer all real property into the name of the Living Trust, including Timeshares, for organization and Probate avoidance. However, you may want to consider placing that rental property into an LLC or other corporate entity first to provide some asset protection.

We will discuss this arrangement in a later blog. If your other real property has been inherited by a spouse such as a family farm, ranch, or commercial building, it may be intended to remain in the family. A separate sole property Trust, should be arranged to insure that it is not to be considered part of the community property estate. Also, it should be specifically identified as such in the spouses’ Community Property Agreement, and excluded therefrom.

Any questions? Okay, email me at jes@jackstephens.com. Until next week, remember you love CONTROL, now TAKE IT.