Homes can be easily conveyed through living trusts
Q. I enjoy your column in the Daily Herald and was wondering if you could answer a question for me?
My sister-in-law is single and her home mortgage is in her name only. She has a will drawn up and my husband and myself are the sole beneficiaries. If she were to die, would her house go directly to us or would it get held up in probate? Do we need to be added to the mortgage? Someone mentioned a "quick claim deed" but I haven't heard this term in years.
A. First, a quick lesson in legal terms. You are not the beneficiary under the will, you are a legatee. And the deed you are referring to is a "quitclaim deed."
A quitclaim deed conveys any interest the grantor has in a property to the grantee. Generally, when you purchase a property, you receive a warranty deed. The difference between a quitclaim deed and a warranty deed is the warranty deed "warrants" certain things to the grantee (purchaser), the most important of which is that the grantor has the legal power to convey title to the property to the grantee. A quitclaim deed merely conveys any interest the grantor has in the property to the grantee. I can execute a quit claim to my mother to Wrigley Field. It is a perfectly legal document, though, unfortunately for both me and mom, it would be worthless.
Having sister-in-law quit claim the property to you now is probably not a good idea, especially if she has owned the property for a long period of time. By taking the property now, you would expose yourselves to capital gains taxes that would probably be avoided if you took the property upon her death. Speak to your tax adviser for further advice in this area.
Adding yourselves to the mortgage would have no impact on conveying title.
Upon the death of your sister-in-law, you may or may not be required to open an estate (probate) to convey the property to you and your husband. This would depend on other factors, such as other assets your sister-in-law may own, other living relatives of your sister-in-law and the willingness of the title company to insure the transaction without an executor being appointed.
One way to avoid probate would be to have your sister-in-law create a living trust and convey the property into her trust. Upon her death, the successor trustee would have the power to convey the property per the provisions of the trust. I would suggest your sister-in-law speak to an attorney experienced in this area.
Q. I was reading your column in the Daily Herald and had a question regarding a home's title.
What is the difference between having your home in "tenants by the entireties" or having it in either the wife's or the husband's "Revocable Declaration of Trust Agreement"?
Are there advantages/disadvantages to either way?
A. Married couples can own their principal residence as tenants by the entireties. This form of property ownership is similar to joint tenancy, in that upon the death of one of the "tenants," the property automatically transfers to the surviving owner. The property is owned, however, by two individuals.
By conveying the property into a revocable trust, the trust becomes the legal titleholder to the property. A person or persons are named as trustee/trustees, who retain the power to control the assets of the trust. Generally, a successor trustee is named so that upon the death of the trustee, the successor trustee steps in the shoes of the trustee and administers the trust assets per the provisions of the trust.
There are numerous pros and cons of each. I suggest you speak to an estate-planning attorney to determine what would be best for your situation.
• Attorney Tom Resnick's column appears every other week in Homes Plus. Send your questions to Tom Resnick, 345 N. Quentin Road, Palatine IL 60067, by e-mail to tdr100@hotmail.com or call (847) 359-8983.