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Ensure your estate plan protects your home

On Behalf of | Mar 7, 2022 | Wills & Estates |

As a homeowner, you may assume you know what will happen to your house after your death. If you have not made specific arrangements for such a transfer, however, your house could end up causing a headache for your heirs. New Jersey allows for several ways for you to pass your home to someone else. At Mariano & Coiro, P.C., we help clients determine the best way to transfer their real estate and other property both before and after their death as part of their comprehensive estate plan.

The following will focus on common methods available to protect your home and to make sure it is passed on to your beneficiaries without having to go through probate.

Gifting your property

Gifting property to beneficiaries before your passing is an effective way to protect your property. Fortunately, New Jersey does not have a gift tax. However, there may be federal tax implications if the value of the gift is over a certain amount. The downside is that once you transfer your property to someone else, you lose control over that property. You may not be ready to do that yet. In addition, if you end up needing to go on Medicaid for nursing or other long term care (also known as New Jersey FamilyCare), a transfer of your house within the prior six years could affect your eligibility.

Placing your home into a trust

You can also gift the property through revocable or irrevocable trust. You may name yourself as  the trustee during your life, if you wish and are able. After you pass, the trust becomes irrevocable (cannot be changed). Your trust may dictate who can use the house and for what period of time, when the house can be sold or even how the proceeds are to be divided upon sale. You may also choose to put the property into an irrevocable Qualified Personal Residence Trust, which can reduce estate taxes. This may be a useful tool for an elderly couple or surviving widow/widower.

Life estates and joint tenancy

Another options some families choose is to change the ownership of the property by transferring it to someone else, usually the owner’s child or children, while keeping an interest called a life estate for the transferor. A life estate allows you to enjoy ownership rights and responsibilities of the house while you are alive, with those rights and responsibilities passing to the new owner, called a remainderman, after your death. This can be a valuable tool for anyone who fears that by gifting the property outright, they can be removed from their home by the new owners.

joint tenancy with rights of survivorship is a similar arrangement, with an important difference. All joint tenants are equal owners of the entire property right away. When any of the joint owners dies, the ownership rights pass immediately to the other owners. It is important to note that spouses who own a property together are automatically considered joint tenants with survivorship rights, even if the Deed doesn’t list their ownership in that manner.

Make sure you chose the right option for your plan

If you wish to discuss the best option for achieving your estate planning goals, the attorneys at Mariano & Coiro, P.C., with over 35 years of experience in such matters, are here to advise and direct you. Consulting an attorney is important to make sure you avoid unintended consequences and that important documents are drafted correctly to reflect your precise wishes. Contact us through our website or call 732-860-7620 to schedule a FREE and CONFIDENTIAL consultation with our attorneys who will help you find the right plan for your situation.