Will Dorothy Still Get to Call the Farm “Home”?

Dorothy from the Wizard of Oz had it right: “there’s no place like home”.   As we move through life, trying to avoid the Wicked Witch of the West and the Flying Monkeys, our home is a place of great love, security and comfort.  Often a lifetime of memories with family and friends is created within its walls.  For many, it’s our most important and precious asset.   Given the importance of the family home, can  Auntie Em and Uncle Henry automatically assume it will pass to  Dorothy when they die?  The short answer is, not necessarily.

Maybe it’s different in the Munchkinland and even Kansas, but if you pass away in Massachusetts, the Probate Court will control where your home goes.  If you die without a Will, the Massachusetts Probate Code dictates who gets your possessions.  That would include your home.  This may not be the way you want your home to pass.  Creating a Will doesn’t necessarily solve the problem,  there is still a risk your house may not go  to whom you want it to.  A Will can be found to be invalid for a variety of reasons which means the Massachusetts Probate Code will again decide who  receives your home.   The other big risk is that if your house goes through probate, the property is subject to creditor claims.  That means your unpaid credit card company could force the sale of your home to satisfy its claims.

Without relying on Glinda the Good Witch’s magic wand, here are a couple of surefire ways to make sure your house goes to the beneficiaries of your choosing:

Create a revocable trust and retitle your home into that trust.  The advantage of creating a trust is that it avoids Massachusetts Probate.  The trust owns the property, and when you pass, the terms of the trust will control who gets your home.   Even though the trust technically owns the home, you still manage the property and control what happens to it.  While you are alive, you can change the terms of the trust at any time and that includes who gets your home.  An additional advantage is that it may reduce, or even eliminate, estate taxes.

Title property as joint owners with rights of survivorship.    When property is owned jointly with rights of survivorship, the property automatically passes to the surviving owner upon your passing, thereby avoiding probate.  This typically happens when a husband and wife own the home together.  There are many potential problems with joint tenancy that can still expose the surviving owner to estate taxes and other headaches.  It also still doesn’t solve the problem of the second to die and avoiding probate.

Transferring property to your loved ones with a life estate.  This type of a deed creates a life estate for your benefit during your life while you transfer the property to the desired beneficiaries (“remaindermen”).  At your death, the house will pass automatically to the remaindermen without going through probate. This will protect the property from your creditors and MassHealth estate recovery should you require Medicaid-covered long-term care in a nursing home. While it does give the remaindermen an interest in the property now, you retain the sole right of possession during your life, meaning that you can tell them to leave if you wish. The only limitation on your control of the property at this time is that you cannot sell it without the remaindermen agreeing and signing the deed.  After your death, the remaindermen will own the property.  Creating this life estate is considered a transfer that will make you ineligible for Medicaid for 60 months.

It’s true there’s no place like home.  But to make sure Dorothy inherits the family home, Auntie Em and Uncle Henry should consult with an experienced estate planning attorney.

Founded by a Nurse Attorney and with offices in Acton and Sudbury, Generations Law Group helps families plan for the responsible transfer of life’s most important asset.