How you title your real estate holdings is key to making sure your assets are transferred according to your wishes after you have passed away. In making decisions about how to title your assets, you’ll want to consider things such as avoiding probate, minimizing estate taxes, and liability protection.
Avoiding Probate
People often want to avoid probate if at all possible. Here are some common ways to do so:
· Trusts. Assets that are held in trusts do not have to go through probate. A revocable living trust is the most common type of trust.
· Joint Survivorship. The title automatically transfers to the surviving owner after the other owner passes away. This is very common for spouses who do not have trusts.
· Transfer on Death Instruments (TODI). This is not recognized by all states, but states that do recognize this (including Illinois and Ohio) offer this simple and inexpensive alternative to trusts. Trusts are still often a more robust and overall better solution, though.
Estate Tax Considerations
Sometimes, how you title your property may affect your estate’s tax liability. One example of this would be, in states that don’t recognize “portability,” spouses with simple revocable trusts may want to have real estate titled in only one spouse’s trust so that the value of each respective spouse’s trust share is more equalized. This can help utilize QTIP provisions allowing couples to “bank” the first spouse’s state estate tax exemption. This can potentially double the total amount exempt from state estate taxes.
Creditor Protection
Limited liability companies (LLCs) and Tenants by the Entirety (TBE) are two common methods used to achieve some level of creditor protection. If you own a rental property and create an LLC, you will want to make sure the property is titled in the name of the LLC so that creditor protection will not be lost.
TBE ownership offers joint survivorship with added creditor protections and makes it so that creditors of one spouse cannot claim the property if the other spouse is alive. Many states do not recognize TBE ownership, but Illinois does allow spousal trusts to hold title as TBE, offering increased flexibility and protection.
These are just a few things to keep in mind when it comes to real estate titling and estate planning. For help with your estate plan, contact us at Wilson and Wilson Estate Planning and Elder Law, LLC at 708 482 7090 for our main office in LaGrange, Illinois or at 847 656 8958 for our Deerfield, Illinois office.
https://www.natlawreview.com/article/estate-planning-essentials-how-smart-real-estate-titling-can-save-you?amp=