Proper estate planning is essential to minimize the cost and time of probating an estate.  Because real property tends to have high monetary value and cannot be easily divided amongst beneficiaries, the distribution of real property can cause major delays and extra costs in probating an estate.  Therefore, it is important that when you set up your estate plan, you account for your real property and ensure that it can be easily transferred according to your wishes.

There are three common ways to assign a beneficiary to your real property:

1.         Purchase the real property so it is titled to you and your spouse as “tenants by the entirety” or “with rights of survivorship”;

2.         Record a transfer on death deed; and

3.         Transfer the title to a revocable trust.  Each has its benefits and detriments – you should always consult an attorney to determine the best option for your plans.

Option 1: Tenants by the Entirety or with Rights of Survivorship.

If you were married when you purchased the real property, it is likely that the title names you and your spouse as tenants by the entirety.  This means that when you or your spouse pass, the survivor of the two of you automatically maintains possession of the property.  However, if you and your spouse pass at the same time, and you have not made any other provisions, then the real property will become an asset of the estate, and it will need to be probated.

Option 2: Transfer on Death Deed – ORS 93.967 and 93.969

A Transfer on Death Deed is recorded with the county while you are alive.  This type of deed is typically recommended when you own real property outright (i.e., you do not owe a mortgage on it).  While you may be able to record the deed with a mortgage, the transfer is subject to the mortgage and any other liens.

Additionally, some loan agreements have an automatic default clause that calls the loan due in full if you transfer title without the mortgage holder’s written approval.  Finally, although this deed should keep the real property out of probate, some title insurance companies may refuse to insure the real property for 18 months, or until probate is closed.  Also, if the beneficiary predeceases you, then the transfer lapses, and the real property will need to be probated.

Option 3: Trust Property

Setting up a revocable trust for your property, both real and personal, is generally advisable if you want to you be able to split all your assets amongst multiple beneficiaries.  It is also advisable to have a trust set up in the event you and your spouse pass simultaneously, if you have minor children, or if you would like to provide for a beneficiary long term.  Yet another benefit of a trust is that any property properly added to the trust is not subject to probate.

Therefore, if you own real property, you may transfer the title to the trust, and the real property will not be subject to probate.  This transfer is done via statutory warranty deed. The statutory warranty deed names you as the grantor, and it names you as the trustee of your trust as the grantee.  In short, you still have complete control over the real property.  However, when you pass, the successor trustee can sell the real property and distribute the proceeds to your beneficiaries according to your wishes.  Or, if you want one beneficiary to receive the real property at your death, the trust can provide for that as well. In conclusion, the most important aspect of estate planning is ensuring that your wishes are executed the way you desire.  To do this, you should meet with an estate planning attorney to discuss your individual circumstances, property, and wishes.