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Any real estate you own should be included in your estate plan. The way your property is titled through the deed determines what happens to it after you pass away. Many people focus on wills or trusts but overlook how the deed itself can affect ownership and how the property is transferred.
How Property Deeds Work
A property deed is a legal document that transfers ownership of real estate from one party to another. The deed lists the grantor (the person transferring the property) and the grantee (the person receiving it), along with a description of the property.
In estate planning, deeds do more than prove ownership. They also determine how ownership passes. Depending on how your property is titled, it could transfer automatically to a co-owner, move into a trust, or become part of the probate estate. Choosing the right structure can save time and avoid legal complications for your heirs.
Ownership Structures and What They Mean for Your Estate
How a property is titled affects what happens to it after death. For example:
- Sole ownership: If you own property solely in your name, it will pass through probate when you pass away. That means the court oversees its transfer according to your will. If you die without one, New Jersey’s intestacy laws will determine who gets it. Probate can be time-consuming, so many homeowners explore ways to transfer property another way.
- Joint tenancy with right of survivorship: If you jointly own property with a right of survivorship, your share automatically passes to the surviving co-owner upon your death. This transfer happens outside of probate. Married couples often hold property this way because it provides an immediate transfer without court involvement.
- Tenancy by the entirety: This form of ownership is available only to married couples in New Jersey. It offers survivorship rights similar to joint tenancy but with additional protection from certain creditors. If one spouse passes away, the surviving spouse automatically is the sole owner.
- Tenancy in common: Under this structure, each co-owner holds a specific share of the property, which can be passed on through a will or trust. There’s no automatic survivorship, so your share becomes part of your estate when you die. This arrangement gives you more control over who inherits your interest. However, it requires extra care in your estate plan to avoid problems later.
Transferring Property into a Trust
Many New Jersey homeowners use revocable living trusts as part of their estate plan. A trust allows you to transfer ownership of your home to yourself as trustee while you’re alive, and then to your chosen successor trustee upon your death. The property doesn’t go through probate.
To do this, the property must be formally retitled in the name of the trust. Simply mentioning the property in your trust document isn’t enough. The deed itself must show that the trust owns the property.
Using Deeds to Gift or Transfer Property During Your Lifetime
Some property owners choose to transfer their home to a child or other heir during their lifetime, often through a quitclaim or bargain and sale deed. This can be an effective way to simplify estate administration, but it’s important to understand the potential tax consequences.
New Jersey doesn’t have an inheritance tax for transfers to spouses, children, or grandchildren, but federal gift tax rules may apply if the property’s value exceeds the annual exclusion amount. In addition, transferring property during life may affect capital gains taxes when the property is later sold. Consult a lawyer before signing a new deed.
Plan for the Future with an Experienced Estate Planning and Real Estate Lawyer
Property deeds can be powerful estate planning tools. Whether you’re setting up a trust, sharing ownership with family, or preparing to pass your home to the next generation, the way your deed is structured determines how that transfer happens.
Merlino & Gonzalez helps New Jersey homeowners plan for the future. Contact us today to find out how we can assist you.