Real Estate Issues & Probate Avoidance — 4/08/09

Kim: One of our viewers emailed in that he tried to file with the county auditor to reduce the county valuation of his home to reduce his property tax. However, because his house was titled in an estate planning trust, the Lake County Auditor told him he had to use an attorney. Here to discuss this issue is attorney Michael Solomon.

Kim: Do you have to hire an attorney to file with the county auditor to reduce your property tax? It might cost you more to use the attorney than you would save in taxes.

Mike: No. most single family home owners can handle this themselves. You can visit the website of the county auditor's office and obtain the filing information that you need. What the viewer is probably referring to is that there was a little confusion regarding filing for property tax reduction or the new homestead property tax reduction for the elderly . For a while some county auditors were demanding that if a house was in an estate planning trust , that you needed a lawyer to file for property tax abatement. At least in Cuyahoga county that is not the case anymore. But that brings up an important issue. How you title your home can have major consequences for individuals and they need to be very careful how they title their property.

Kim: Mike I own a home and it is titled in the name of me and my husband . Is that ok?

Mike: Kim , I am going to give you a lawyer answer. It depends. Let me go over the different types of home ownership.

  • Joint and Survivor deed- This is the most common type of deed. You and your husband probably have this. If one of you passes away the other inherits the house and there is no probate and no tax cost. However, if your deed does not have the magic words " with rights of survivorship", then you may have what's called a tenants in common deed. That means if one of you passes away the house will have to be probated which could adds thousands of dollars of extra costs to transfer the house to the survivor.

    But let me warn your viewers don't put the house in joint and survivor with a child. That could cost you tens of thousands of dollars of extra income taxes if the house is sold. Also, if your child is married, you will need your in-laws approval to sell the house. Worse if you child gets a divorce you could lose a part of your home.

  • Transfer on Death Deed- With this deed you have a named a beneficiary to inherit your house and you avoid probate. This is a good deed to use if you want a child to inherit the house. You don't have any adverse income tax consequence and your child and your in laws have no say when you sell the house. However, if you have many children, it might be cumbersome for your children to sell the property when you die.
  • Revocable Living Trust. If you title your house in trust you avoid probate, and have the most flexibility on how you dispose of your house on death. However, if you are refinancing your home some banks make you take the house out of the trust before you can refinance. This causes a lot of extra paper work.

How you title your house can impact who controls your home, your income taxes and probate costs. Plan carefully with what may be your largest asset.

Kim : Thank you for that practical information . If you have any questions for Michael, e-mail us at [email protected], and he will try to answer your questions next week.