A home or a vacation property can store much of your or your family’s total wealth, making it a priority for you to preserve that wealth for your loved ones. As a result, the estate planning process may focus on protecting, managing, and passing on real estate assets. But what options do you have for handling your real estate assets in a Texas estate plan?
Why Real Estate Requires Specific Planning
Real estate does not always pass automatically to children or other family members like other types of assets, such as a bank account with a transfer-on-death designation. In many cases, real estate passes through probate, which can be time-consuming and costly for families, depending on the complexity of a loved one’s assets. Individuals and families have numerous options for planning to handle and pass on real estate. But each option has benefits and complications. Other complications, such as co-ownership arrangements (e.g., tenancy in common, joint tenancy with right of survivorship, etc.), can also make protecting and passing on property challenging. As a result, property owners should take specific care to plan for real estate assets.
Common Estate Planning Options for Transferring Real Estate in Texas
People who own real estate can use various legal strategies to protect and pass on their property. Some of the most common estate planning options include:
- Revocable living trusts: A revocable living trust can hold real estate as an asset, allowing a property owner to pass on the property outside of the probate process. An owner can appoint someone else as trustee to manage the property for them, or designate a successor trustee in the event of incapacity or death, to distribute the property per the trust document.
- Lady Bird deeds: A property owner can use a Lady Bird deed (enhanced life estate deed) to reserve the right to continue living in their property during their life while automatically passing it to chosen beneficiaries after death. Lady Bird deeds offer significant flexibility and control, as an owner can still mortgage, lease, or sell the property during their life. These deeds also offer tax or other financial benefits and allow owners to pass on their property outside of probate.
- Transfer-on-death deeds: Transfer-on-death deeds provide an alternative to Lady Bird deeds, with a few restrictions, and more states recognize TOD deeds than Lady Bird deeds.
What Happens If You Do Nothing
If you pass away owning property without establishing an estate plan to pass on that property, your property will pass according to Texas’s intestacy laws, which determine your heirs who will inherit your estate. The inheritance of real estate not covered by an estate plan will depend on factors such as whether you are married or have children and whether the property qualifies as community or separate property.
Community Property Considerations
Texas uses community property rules, which determine how married spouses own and transfer real estate. These rules can add complexity for second or subsequent marriages and blended families. Community property rules differ from the real estate rules followed in many other states. As a result, property owners in Texas must consider how community property affects their ownership rights and legal options when creating an estate plan to protect and pass on real estate.
Contact Our Estate Planning Team Today for Seasoned Legal Counsel
For many individuals and families, real estate represents their most important asset. As a result, developing estate planning strategies to preserve property can help manage wealth. Contact Guest & Gray today for a confidential consultation with a Texas estate planning attorney to learn more about your legal options for protecting and passing on your real estate assets through a comprehensive estate plan.
