Real estate transactions – from transfers between family members, purchases, sales, and even refinancing – could have an impact on your estate plan. I ran across a brief article last week in the Dedham Daily News Transcript that lists 5 estate planning factors to keep in mind when transferring or mortgaging real estate:
· Homestead Protection – Every state has some type of Homestead Protection, which protects homestead interests from creditors' claims. Be careful when transferring or re-titling your home, as a false step could void your protection. For example, in Hawaii, property held by a married couple as tenants by the entirety is exempt from the debts owed by only one spouse. Owners of Hawaii real estate must be especially careful not to compromise the asset protection offered by this form of ownership.
· Property Tax Exemptions – each of the counties in Hawaii offers property tax exemptions for certain types of property owners, such as owner-occupants, senior citizens, or owners who meet certain financial criteria. If the property ownership is transferred to a trust or to other family members, those exemptions may be lost. In addition, the exemptions are not automatic. You must apply for them by the deadlines set by each county. Those deadlines expire before the commencement of the tax years for which exemptions are sought.
· Title Insurance Policies – Transferring property to a trust or to another family member could terminate your title insurance coverage. Be sure check on the steps necessary to continue your coverage in the event you wish to make a transfer.
· Trusts and Estate Planning – Be careful about transferring real estate into or out of any trusts you may have established as part of your estate plan. Be sure to consult with your attorney about how these transfers could impact the effectiveness of your plan.
· Mortgaged Property – If you have a mortgage on your property, the mortgage probably prohibits any transfer without the lender’s consent. However, federal law permits transfers to certain trusts and family members under certain circumstances without violation of the terms of the mortgage. Each circumstance should be reviewed and legal advice obtained before transferring mortgaged property.