Want to Avoid Probate? Check the Names and Words in Your Deed
Avoid Probate With a Deed That Includes These Magic Legal Words
Deeds often get overlooked as legal documents—at least, they don't always get the same respect that court orders do. But they are, in fact, quite legally binding. Phrases and terms included in them can have wide-ranging and serious effects, possibly something you never intended. If you've decided that a "deed is just a deed" and you intend to draft one yourself, here's what you need to know first.
Your Co-Owner's Creditors
It sounds like a good idea on the surface: Put your child's name on your home's deed so it automatically passes to him when you die. Not so fast.
You may be waving a flag at your child's creditors. Depending on how you write your deed, it's possible that if he gets into financial trouble, his creditors can force the sale of your home to recoup what he owes. Yes, that's right. You could lose your home while you're still alive to companies or entities to whom you don't personally owe money.
How Title Is Held
Aside from that, the real problem lies in how the deed is worded. In many states, the default ownership for real estate when more than one name is on the deed is as "tenants in common." This is usually the case unless there are just two owners on the deed and they are legally married.
If three names appear on the deed—maybe yours and those of two of your children—each individual is considered to be a one-third owner of the property. When one owner dies, his or her one-third interest goes to his heirs through probate, either as provided in his last will and testament or according to the laws of intestacy in your state. Intestacy laws take over when a decedent does not leave a will. They assume that an individual would want to leave his property first to his spouse, then to his children and so forth.
Parents are not typically high on lists for intestate succession and usually only inherit when a decedent leaves no spouse, children, or grandchildren.
So you see where this is headed. Your name might also be on the deed, but your child's share of your property is most likely not going to go to you unless he also leaves a will directing that this is what should happen in the event that he predeceases you. It might go to his spouse who you don't particularly like, but now you're co-owners of the same property.
Avoiding Tenants-in-Common Ownership
Fortunately, tenants-in-common ownership can be avoided very easily. Simply add a few magic legal words to the deed. The exact words are governed by individual state law, but they typically include some variation of "joint tenants with right of survivorship." The key term here is "survivorship." This means that if the individual whose name you add to your deed predeceases you, his share of the property automatically reverts back to you—typically without the necessity of probate.
The moral of the story: If you want your real estate to pass outside of probate to the other people listed on your deed, make sure it uses these magic legal words. Consult with an attorney, if necessary, to make sure you get the words right and to find out what will happen to your property after you die.