A Deed’s Vesting Leaves Heirs Vulnerable to Probate

A couple, John and Joan, came into our Walnut Creek office to change the vesting on a deed. Vesting is the manner in which you hold title to your real estate as reflected on your deed. Proper vesting is required every time you file a deed, and includes Sole Ownership, Joint Tenancy and holding title in one’s Living Trust and others. Each is unique; some allow the owners to avoid Probate and others do not.

Three parties on the deed

In this situation, there were three parties listed on the deed, but only one party, John and Joan, actually owned the home. The other two parties, Johnson and B. Smith, were on the title for purposes of financing only. John and Joan wanted to change the ownership so they could get the Johnsons and Smiths off the title and refinance the property. They would be changing the ownership relationship:

• John and Joan: 20% to 50%
• Johnsons: 40% to 25%
• B. Smith: 40% to 25%

The Johnsons owned their property in a revocable Living Trust and B. Smith owned his share as an unmarried man. John and Joan were married, but owned the property in her name only. All of these people have children who would eventually become the heirs.

Sole Ownership: Probate required

When property is owned by only one person it is considered Sole Ownership. If the sole owner dies, the property goes into Probate, a special court that determines how a deceased person’s estate is to be distributed. Probate is an expensive and time-consuming process that can be avoided by creating a Living Trust or a Joint Tenancy.

Since Joan’s husband was not on the title with her, her percentage of the property would go into probate and her husband would eventually get one third and her kids would get the other two thirds, but Probate would cost $10,000+. B. Smith has a daughter and also owned his property as a sole owner. Upon his death, his share of this property would also get caught up in Probate and cost his daughter upwards of $10,000. Neither Joan nor B. Smith realized that by having his/her deed vested as a sole owner, they were setting their heirs up for probate.

What began as a simple request to transfer a deed became more complicated, but this story has a happy ending. B. Smith and John and Joan created Living Trusts, Wills and Financial Powers of Attorney and Advance Healthcare Directives. The new deed was redistributed and all of the spouses and children were protected from Probate.

Is the vesting of your deed making your heirs vulnerable to Probate? We help our clients change vesting options and create Living Trusts. Stop in at one of our California Document Preparers offices to get started.