When you buy a home, you vest title based on the names you put on the purchase and sale agreement. This means that once you close the purchase, the real estate records will show your names according to your preference. But here’s the question, does it make any difference how you vest title? Oh yes, it certainly does.
How Vest Title on Real Estate
Washington state is a community property state. That means that if you buy a home here as husband and wife, i.e. “John and Mary Doe, husband and wife,” you will own it together, and the survivor of the two will own the property entirely. In other words, this is the same as owning property “as joint tenants with the right of survivorship.” Whoever survives gets the property. This is how most married couples purchase their property, and you can vest title the same way even if you are not married. But are there other ways to vest title?
Vest Title – Estate Planning
How you vest title affects your estate planning. If you have children from a prior marriage, you may want to have a Last Will and Testament drafted that makes it clear that some portion of your half of the estate goes to your children (or grandchildren) and the remainder goes to your surviving spouse. You can also create a Revocable Living Trust, which will help your spouse and heirs avoid probate, attorney’s fees, and long delays. I highly recommend the RLT or revocable living trust. If you have a very large estate in the tens of millions, you may want to do some exotic estate planning to reduce inheritance taxes for your heirs and for asset protection purposes. That could involve irrevocable life insurance trusts, charitable remainder trusts, and so on. [Read more about trusts on my estate planning site at Estate Planning.]
If you are going to get a loan to purchase your home in Sequim, you will have to purchase (vest title) in your personal names, because the lender will require that, but subsequent to closing, you can execute a quit claim deed and transfer the home into your trust.
Lastly, you might find value in knowing what the two biggest mistakes retirees make on this subject of how to vest title. The first is not to do any estate planning at all. In the typical scenario, a couple retire to Sequim in their 50’s or 60’s, and 20 plus years later the husband passes away leaving his widow to fend for herself with no estate planning, poor financial planning for his widow, and a home that cannot easily be sold but is way to much maintenance for an elderly widow. This happens all the time in Sequim, and it is totally preventable.
The second mistake commonly made is to marry a second time later in life and not have any estate planning in place. That normally means the adult children from the first marriage will get nothing, and the new spouse who came late in life and may have been married only a few years, will get everything to the exclusion of all the children. That is not usually what people would intend to do. But with no estate planning at all, and depending on how you vest title to your real estate, it can and does happen. As your Realtor and buyer’s agent, I can advise you on how to cross your T’s and dot your I’s when you buy and vest title.
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