One goal of estate planning is to ensure that your assets, including your home, pass to your chosen beneficiaries quickly and with minimal expense. In real estate, a common strategy to avoid probate (the court process of validating a will and distributing assets) is to add others to the title.
This strategy involves adding the names of your children or other beneficiaries to your property’s deed. Often, the goal of this approach is to take advantage of rights of survivorship: when you pass away, ownership of the property transfers to the surviving co-owner(s) by operation of law via such survivorship rights, thereby bypassing probate.
Many people attempt to execute this strategy themselves, believing that they can simply download a deed form from the internet or get a template from a book, fill it out, and record it with the appropriate authority.
This simple mistake can turn into a costly nightmare. Deeds are complex legal instruments that must comply with state law to be valid. In most states, property will not pass to the other owners listed in a deed without probate unless certain specific legal terms are used in the deed. In addition, many states have different rules and different forms of joint ownership with survivorship rights, so what works in one state may not work in another. Furthermore, adding others to your house title can have unintended consequences, such as tax implications and potentially exposing your home to someone else’s creditors.
The Risks of an Invalid Do-It-Yourself Deed
If the deed you create is defective or invalid, the property will not automatically pass to your intended heirs upon your death. The worst part is that these issues often remain undiscovered until it is too late. Consider the potential risks of an invalid do-it-yourself (DIY) deed.
- The problem is found too late. If a mistake in the deed is found while you, the original owner, are still alive, the problem can usually be fixed by having an attorney prepare and record a corrective deed. Unfortunately, a defective or invalid deed is most often discovered after the owner dies, when they can no longer sign the necessary paperwork to correct it. If the problem cannot be fixed, the property will likely be forced into probate to clear the title and determine the legal owners.
- Probate can be costly and time-consuming. Forcing the property into probate defeats the entire purpose of the DIY deed and results in the very outcome you tried to avoid. Probate incurs legal fees and court expenses, sometimes totaling thousands of dollars—far more than the cost of having an attorney prepare a valid deed in the first place. Until things get sorted out in probate court, heirs may be unable to access, maintain, or sell the property. This delay can span many months and, in some cases, years, causing significant financial hardship or missed opportunities for your beneficiaries, especially if the housing market changes substantially in the meantime.
- The property can go to the wrong person. In the worst-case scenario, the property may be inherited under the state’s default intestacy laws (the rules for who inherits when there is no valid will or a title transfer mechanism). As a result, the property may be inherited by someone you intended to disinherit when you prepared and recorded your own deed.