Transfer Upon Death deeds being research on computer by husband and wife.

What is the best way to leave property upon death?

If you’re in the midst of estate planning, you may be wondering: what’s the best way to leave my property when I die? How do I leave my house to my children?

Unfortunately, there’s no cut-and-dry answer. What’s best for one individual or couple may not be right for another. However, there are some basic concepts to consider that will keep you on the right track to leaving property upon death.

First, let’s talk a little bit about what we mean by the word “best.” For most people, the best way to leave your assets is the way that creates the least cost and hassle for your loved ones while ensuring that the intended parties get the intended assets. 

See: Should you talk to your children about your estate plan?


How not to leave your property

Imagine you’re hoping to leave your family home to your two children. 

You own the house alone (your name is the only name on the title), and that ownership remains in the name of your estate if you die. For someone else to own the house, the title will need to be transferred into their name. 

First: what’s the worst way to leave your property when you die? Do nothing to leave your property at death and assume your kids will figure it out. 

If you die without a will, the intestate succession laws in your state will determine who gets the home. To identify the appropriate beneficiaries and transfer title, your estate will have to go through probate. And it may not end up where you would have intended. 

Even if you leave a will but don’t do additional planning or documentation about your property after death, your children will have to go through the probate process to prove the will and then transfer title of the home to themselves. If you have multiple children and you designate all of them as beneficiaries of the home (a common choice), they will each inherit an undivided interest in the home. That means they must all agree on whether to keep or sell the house. 

Either of these options creates situations that are ripe for tension between and among the people you love.

See: Why Does Probate Take So Long?

Let’s jump into some better options and the pros and cons of each. 


Creating a Transfer Upon Death (TOD) deed 

Not all states allow TOD deeds for property — a little over half do. But if your state does, you can record a deed that designates the beneficiary of the home upon the death of the homeowner(s). 

TOD deeds are similar to payable-on-death designations for a bank account. The beneficiary has no right to the property until your death (or until the last surviving owner dies if you own the property with another individual). 

Pros of using a TOD Deed

  • Because the beneficiary has no right to the property until you die, you can maintain the property as you choose.  You can sell it or mortgage it. 
  • While there may be a little paperwork for the beneficiary to fill out upon your death, the process is significantly cheaper and less time consuming than probate. 

Cons of using a TOD Deed 

  • Not all states allow TOD deeds, so they may not be an option where you live. 
  • TOD deeds need to have up-to-date contingency plans (something you should create for all documents that designate beneficiaries) so that changing circumstances don’t result in someone you didn’t intend or someone who is deceased inheriting the property. If the beneficiary predeceases you, the property will have to go into probate. 


Putting the property in a Living Trust

Another option for inheritance planning is to create a living trust. A trust is a legal arrangement that gives a trustee the task of holding assets (including property) on behalf of a beneficiary (or beneficiaries). Living trusts allow you to continue to manage and receive benefit from assets while you are alive. 

Pros of creating a Living Trust for property

  • Any assets (including property) that are included in a living trust don’t have to go through probate after death. 
  • You can leave the property to several people but designate the trustee to decide how the property will be managed — for instance, who will get the house itself and who will receive assets of equal value to their portion of the property. 
  • You can manage the property as you wish during your lifetime.

Cons of creating a Living Trust for property

  • Any outstanding debts on the property must be paid before the property can be transferred to the beneficiary.
  • You would likely need to hire an attorney to help you create a trust.


Using Joint Ownership of property

If your deed includes the words “joint tenant with right of survivorship,” then you and the other individual(s) in the deed are equal co-owners of the property right now. If you die before your co-owner(s), the property will automatically transfer to them. 

So, for example, if you’ve previously owned your home with your spouse, but you modify your deed to include your child as a joint tenant with right of survivorship, each of you now owns a one-third interest in the home. If you were to die before your spouse or child, they would each own half of the home. 

Pros of Joint Property Ownership 

  • Continued ownership and transfer of the remaining interest is automatic upon the death of one of the co-owners, so the property doesn’t have to go through probate. 

Cons of Joint Property Ownership

  • Because you have a co-owner, you do not have complete control over the home. That means if you want to refinance or sell the home, you have to get the consent of your co-owner(s). 
  • If one of your co-owners has a delinquent debt, the creditor could put a lien on the home. 

See: What happens to real estate assets in probate?

As you can see, there are pros and cons to any method for transferring property assets to your beneficiaries and leaving property upon death. Carefully consider your current financial situation as well as the financial situations of your intended beneficiaries before making a choice. Whatever you decide, always make sure your estate planning documents are up to date. Have questions? We can help.