Adding Joint Tenant to Real Property to Avoid Probate
In our last article, Part I of III, we discussed a Living Trust and LLC in regard to real property. In Part II of III, we will address adding a Joint Tenant after a purchase or refinance of real property. An additional person is often added to the title in order to avoid probate. If there is only one person on title and no trust or LLC, the property is exposed and will go through probate upon the owner’s death. Depending on whether the property was purchased with cash or financed will determine the appropriate steps to add an additional person to the title as a joint tenant*. We will address those scenarios now.
Real Property Purchased Without Financing – Cash Buyer
If a single individual buys a property and passes, the property will go into probate. To offset this potential hardship, you may consider adding an adult child who is preferably unmarried. Adding the adult child to the tile of the property with the parent requires the correct deed, i.e. document is created that vests the ownership as joint tenants with the right of survivorship. Your closing/settlement agent is not responsible for handling this modification after the closing of escrow. It is your responsibility to get this done. We have seen multiple cases where clients took it upon themselves to process this paperwork; this is not usually a DIY project. Here is an example of multiple mistakes by a homeowner who went the DIY route.
Mishap – A parent purchased a home for all cash and then a few years later decided to add their only child to the title as they were getting older and starting to think about “what if and just in case.” They contacted a friend that used to be in the real estate industry and the friend helped them create the deed adding the child (DIY). Initially, they may have saved a few hundred dollars; however, the document was using incorrect language to protect against probate and missing marital information for the adult child being added to the title. Unfortunately, the parent passed, and we were contacted to remove the deceased parent. After we did our preliminary property search and review, we determined the problem with the DIY document, and the child ultimately had to probate the parent’s estate. This ended up costing the adult child many thousands.
Real Property Purchased with Financing
When financing is involved, the borrower(s) must seek a lender and qualify for a mortgage. Oftentimes, only one of them qualifies to be on the loan, or having one on the loan may qualify them for a lower interest rate. This can be both for a married couple, domestic partners** or significant others.
Mishap Avoided In this scenario, a couple purchased their dream home, and the lender was only able to qualify one of the spouses (the borrowing spouse) on the loan. At the time of closing, the Settlement Agent/Escrow Officer received instructions from the lender for the non-borrowing spouse to sign a deed and relinquish all interest in the property. The money for the downpayment was contributed by the non-borrowing spouse even though she couldn’t qualify for the mortgage because she had zero credit with significant family assets. In this situation, the spouses wanted both of their names on the title. They went to a paralegal who was not experienced in title vesting. The deed/document indicated the ownership as 50%/50% with the right of survivorship. This language contradicts itself in its attempt to avoid probate. Fortunately, in this case, the client contacted us about an investment property. As a result of our property search, we discovered the incorrect language on their primary residence and we could remedy the situation.
Individual Who Is Not Married – Cash or Financed
Here we have a successful individual who may or may not still be working full or part-time. They are financially independent, travel and do what they want. They are currently single and whether in a relationship or not, they have no desire to be married. However, they are aware of probate and its potential pitfalls and want to be sure that their real property avoids probate and passes to their heir(s). Although they have a Will, they know that having a Will does not avoid probate.
Another Mishap Avoided – we had a client who was getting ready to have surgery. She wanted to be sure that her real property was set up correctly to go to her only daughter “just in case.” The mother and daughter lived together and the daughter was unmarried. We added the daughter to the title as a joint tenant. Mom was fine after surgery and appreciated peace-of-mind knowing that in case it did not go well, her daughter would be all set.
In Part III of III, we will discuss transferring property to a beneficiary where the owner still maintains control of the property.
*Joint Tenants with Right of Survivorship (Upon the death of one of the joint tenants, the property passes to the surviving joint tenant(s); it does NOT go through probate.
**This article refers to real property in the state of Nevada. Please give us a call to discuss specifics involving any other States.
None of the above is a substitute for consulting with an Estate Planning Attorney and Certified Public Accountant.
Quick Claim USA, a Service Provider, and is not an attorney in the State of Nevada nor in any other state or jurisdiction. Service Provider is not licensed to give legal advice and may not accept fees for giving legal advice.
