Owning real estate in California is not a simple matter. In the Bay Area’s highly competitive and quickly appreciating market, homeowners often make mistakes.
Have you done all you can to protect your home and family? Are you maximizing the benefits of real estate ownership, or are you putting what and who you love at risk by failing to take the necessary steps to protect your investment?
Consider these horror stories:
- The homeowner rented a condo via Airbnb and came home to find a meth lab in the bathtub. Did insurance cover that?
- One of three condo owners died without an estate plan. What recourse did the remaining tenants have during the two years the unit was held up in probate?
- A homeowner in San Francisco has an income-producing property in Berkeley that is rented to rowdy college students. How can the primary residence be protected for potential liability in Berkeley?
- A couple purchased real estate before they were married and held it as tenants in common. They did not know that they could change the title to community property with rights of survivorship to receive a “double step up” in basis while preserving their Prop. 13 property tax assessment.
Tip #1: Create a Revocable Trust to Avoid Probate.
Real Estate in California is subject to Probate. Probate is a lengthy and expensive court process. Probate fees are based on the gross value of property in the estate at the time of the decedent’s death. Probate fees are determined and awarded by statutory law in California. Further, the fee, once calculated, might be paid twice—to the attorney and to the executor. How can you avoid this? By creating a revocable trust.
Tip #2: Update your Address.
Update your Address. Now that you are in your new home, it is very important that you update your address with the appropriate entities and the post office. To ensure that you don’t miss any important tax notices or refunds, you will also want to update this information with the Internal Revenue Service, using Form 8822, and your local state tax agency.
Tip #3: Make Sure your House Title is Correct.
Avoid Capital Gains Exposure, Make Sure your Home Title is Correct. Do you know how you “own” your real estate? Is it community property, or a joint tenancy or a tenancy in common? Do you know the different tax treatments these receive on death, regardless of whether you have transferred the real estate to your revocable trust?
Tip #4: Check your Life Insurance Coverage and Beneficiary Designation.
Check your Life Insurance Coverage. Life insurance can protect a surviving spouse or partner by giving them the opportunity to pay off a mortgage in the case of untimely death. Your revocable trust should be the beneficiary of this policy to ensure the surviving spouse has the flexibility they need to make the right decisions when the time comes.
Tip #5: Ensure your Home and Umbrella Policies are Up to Date.
Ensure your Home and Umbrella Policies are Up to Date. Protecting your largest asset is critical. When did you last meet with your insurance broker? With home prices continuing to rise, how do you know if your largest asset, your home, is fully protected? Umbrella insurance is critical. You will sleep better tonight if you stop reading this post and call your insurance broker to talk about umbrella insurance now.
De Fonte Law PC is Here to Help. If you already own real estate or are ready to become a homeowner, we are here to help protect what and who you love, connect with us!
