Realtors and other San Diego Professionals: How Should Your Clients Take Title To Their Home?

How Should Your Clients Take Title To Their Home?

A Guide for San Diego Realtors

By Kristina R. Hess, San Diego Will, Trust and Estate Attorney and Counselor at Law

I recently spoke to a group of Realtors at Keller Williams in La Jolla, California.  Realtors are the first in line to educate their clients/customers on how to properly title the houses they buy.  Yet, realtors need to be careful not to give legal advice; thus, it is helpful to have a good trust attorney who can answer client questions.

How about you?

How many times has one of your clients asked you “How should I take title to my new home?”

It’s a question I get all the time as an estate planning attorney.  You have the opportunity to make sure that your clients have all the benefits of rightly titled property and they will definitely thank you for it.  When John and Sue  buy their dream home in Del Mar, make sure they title the home properly.

Why is titling property correctly so important to homeowners?

First, if titled incorrectly, the property owner cannot control what happens to the property after he dies; second, if titled incorrectly, the heirs can lose the property to creditors, the government, or even an ex-spouse; third, if titled incorrectly, the heirs will have to pay capital gain on the sale of the property.

Three Common Ways to Hold Title

  1. Joint Tenancy:  The worst part about joint tenancy is the owner who dies first cannot control what happens to the property after his or her death.  Joint Tenancy ensures that there will be a probate upon the death of the second joint tenant.  Finally, the surviving joint tenant will pay capital gains tax on one-half of the property after the death of one joint tenant.
  2. Community Property:  Possibly the most common way for married couples to own property, Community Property causes half of the property owned as community property to be probated upon the first death and the whole property must be probated upon the second death.  There are three evils of probate: 1) it’s very expensive – roughly 5% of the value of the estate; 2) it is very slow taking at least one year maybe longer; and 3) it is a public process and predators and the rest of the world are watching.
  3. Community Property with Right of Survivorship:  Like joint tenancy, CPw/ROS is a he who dies last wins situation, because the surviving owner controls the disposition of the property on her death.
  4. The Fourth and Best Way to Own Property – A Revocable Living Trust: 

The best way for your homeowners to own their property is in a revocable living trust.  A properly drafted and funded trust will avoid time consuming, expensive and public probate upon the first death and the second death.

A revocable living trust will make sure that the right people receive the property after the death of both owners and that it doesn’t go to creditors, predators, or future spouses.

Property received by the heirs can be sold free of any capital gain tax and can be protected from creditors and predators of the heirs.

Property owners can avoid paying capital gains tax at the first death if the trust is set up properly.  Tax laws are changing all the time, so that is why it is critical to review your estate plan at least every three years!

© 2014 Kristina R. Hess Attorney and Counselor at Law.  For informational purposes only and not intended to provide legal advice.   I am not your lawyer unless we have a written engagement agreement.

Now you too can book San Diego Will and Trust Attorney, Kristina R. Hess, to speak to your group of realtors. Email us or call 858.461.6844.