People own land. This concept is as old as dirt. Still, I sometimes daydream about how land was transferred in the days before government agencies regulated out all of the chaos and fun. I envision a scenario where a person laid their claim to a piece of land (recently and involuntarily vacated by a now-deceased owner) simply by physically presenting themselves on it. It would become theirs either because no one else would show up and forcibly remove them or because someone else would show up and fail. I suspect that this became a problem in part because the economy is not stimulated by members of the community devoting all of their time to defending their ownership of land. There was also probably a lot of fighting.
So, instead, we substituted our own physical presence with the physical presence of paperwork. Parcels of lands and homes are now transferred between people at death based on what paperwork is present.
While it is important to know who is receiving your property at your death, it is also important to know when they are receiving it. In North Carolina, real property is transferred immediately upon a person’s death. Initially, this sounds like a simple process. No deed or other arduous paperwork is required. Provided you file the will or the death certificate with the appropriate government office, the title to the property is considered transferred retroactive to the person’s death. If I own land and die on August 1 and I have named my son as the beneficiary of my estate, my son owns that land on August 2 regardless of when the paperwork is filed.
Unfortunately, there is an important catch. The beneficiaries of your land or home are also immediately responsible for the maintenance, support, mortgage, insurance, taxes, utilities, and any other bill that may relate to this piece of real property. Unless you specifically tell your Executor in your will to sell your land or home, your Executor is not allowed to use the funds in your probate estate to pay for these bills. If they do use these funds, the court is likely to hold the Executor personally responsible for the unauthorized payments.
If you leave your home to more than one person, all of your beneficiaries are required to pay their pro rata share of each bill that comes in. Leaving your land or home to multiple beneficiaries also means that each beneficiary will have to sign paperwork required to sell your land or home.
By way of illustration, I have repeatedly helped administer estates where the beneficiaries are a mixture of charities and individual family members. If someone is benefitting a charity, they often do this by including a percentage interest in their will to pass to that charity. The other percentage interests are probably passing to their children or loved ones. When they die the title immediately passes to the beneficiaries named in their will. Can you imagine waking up one day and owning a piece of real property with several other individuals and a couple of charities?
This causes all beneficiaries that are inheriting your land to get along well enough to share in timely paying bills and signing paperwork. In these estates, every time a decision must be made about the real property, the charity’s signature must be obtained along with the signatures of all of the individual beneficiaries. I have experienced such extreme delays in receiving a decision as to whether an offer should be accepted that the offer is no longer available once the decision is made unanimously.
As a valuable side note, if you own land in another state, further complexities arise due to the need for an additional probate of your estate in that state. A revocable trust can solve this problem for your heirs by your transferring title to the trust during your lifetime. This involves special planning but the costs you incur up front are far less than what your estate will pay on the back end.
One of my goals as an estate planner is to alleviate all potential conflicts and provide clear, easy direction as to how to proceed with each property transfer. In my experiences, asking more than one person to agree on anything after the death of a loved one has the potential to breed conflict and resentment. If your home is passing to more than one person at your death, make sure that you have thoughtfully decided how its financial responsibilities are passing as well. You may decide to ensure your beneficiaries have immediate access to funds or perhaps you think it is appropriate to put one person in charge with one pot of money and have only the proceeds split between beneficiaries.
As always, the best any one of us can hope for is a thoughtful and educated decision that requires the least amount of paperwork.
Originally published in Southern Neighbor, February 2014