In California, there are seven ways to hold title to real
estate, each with unique advantages and limitations. When you buy a
house, you will need to decide how you want to hold title. It’s an
important decision so make sure you discuss it with your real
estate agent and escrow title officer. Generally, neither of them
will be either an attorney or a CPA, so you might need to have a
chat with those professionals as well.
In California, there are seven ways to hold title to real estate, each with unique advantages and limitations. When you buy a house, you will need to decide how you want to hold title. It’s an important decision so make sure you discuss it with your real estate agent and escrow title officer. Generally, neither of them will be either an attorney or a CPA, so you might need to have a chat with those professionals as well.
The way you hold title will determine what happens to the ownership of the home when you’re dead. I know, I know. We don’t like to mention that word. But face it: no one gets out of here alive, so it’s best to be prepared.
Here are the questions of the day. Do you have a will? How about a trust? It is amazing how few people actually have these documents. But they are essential if you want a say in what happens when you’re gone. Yeah, yeah, I know. You’re going to beat the odds and live to a happy, healthy 125. But you’re still going to check out sometime.
So, let’s imagine you and your spouse own a home. You hold it as community property. That’s great. If one of you dies, the other one owns the whole thing. But now imagine you have a couple of kids. And you and your spouse leave them home with a babysitter while you go out on a date. You both eat some bad food and die of food poisoning or you get hit by a falling asteroid. Then what? Your kids inherit, right?
Not so fast. It actually goes into probate and you know how things get once the government gets involved. There may not be enough equity to pay the probate costs and the taxes, and your kids could get nothing.
Or imagine that you and your spouse have a child, but one of you has a grown son from a previous marriage. What about that person? It can get very confusing.
A will can spell out what you want to have happen, but a trust can help with tax concerns. Take the first case where the two of you have kids together. They are named as the beneficiaries of the trust. In the case of your demise, the ownership of the house passes to them (depending on their age they could have someone named to watch over it for them). There are no estate taxes.
In the second case where the children might not inherit equally, there can be trusts inside the trusts, or other legal ways to see your wishes are carried out. A good lawyer can do a trust quickly, so the fees are reasonable and the peace of mind is priceless.
For you younger folks who have kids and think you’ll never die and that there’s plenty of time to take care of this when you’re older, consider this: If you die without naming a legal guardian the government can place your children in the foster care system. Whoa, doggies! That ought to be enough to make you put down the beer, get off the sofa and take care of business. (While you’re on your feet, you might want to jog a few blocks. You could make 125 after all.)
I know a professional couple that are childless who have taken the time to arrange for the disposition of their house. This is a true story: The cat gets the house. Mind you, it’s a very beautiful cat, but the house is even more beautiful, located in the hills of Monterey overlooking the bay. It has been recently remodeled and it is truly spectacular.
Here’s the deal. The wife’s sister gets to live in the house as long as the cat is alive. Upon the death of the cat (and you know the darn things have nine lives) the house is sold and split up among all the siblings.
Now here’s the kicker. This cat is a pure breed, and all of them look alike. So the other siblings are threatening to take fur samples to be tested for DNA so that the one sister can’t just keep replacing the cat so as to be able to reside in the home forever. It’s become a big family joke.
Since the couple is middle aged and healthy with no alarming bad habits it is unlikely that the cat will outlive them. But they know it’s better to be safe than sorry. And I imagine the cat sleeps better at night, too. Oh, no. I forgot they sleep during the day and prowl around looking for mice at night. (Do purebred cats eat mice, too?)
Anyway, let’s talk about the market for a minute. There are still homes being sold and closing escrow. But the inventory is large now. This is good news for buyers. You’ll find a wonderful array of options. For sellers, the key word remains, “Patience.” You’ll want to make sure your home shows to its best advantage. Keep your asking price at the low end of your market segment, and make sure you offer a full commission … your competition probably is.
And be kind to your Realtor. He or she might leave a house to you instead of a cat!
