I help people with comprehensive legal planning, but I also help families who have recently lost a loved one: spouses, parents, kids, and siblings. The probate/estate administration side of my practice really informs the planning side of my practice. I'm able to see how estate and business plans actually worked out for these families. Overall, there is one consistent theme in most will-based plans that ends up being a huge burden for the beneficiaries: people need to leave their house to their Executor and most don't. Why, you may ask? Here are three reasons why you should leave your house to your Executor. For example purposes, I'm going to frame these reasons as the context of a parent leaving their home to their kids.
Real Property Passes Immediately to Your Beneficiaries
Legal title to your house will transfer immediately to your kids upon the filing of your will and death certificate. The date of the transfer relates back to the date of death. So, if you pass on March 1 and your will and death certificate are filed on May 1, the transfer takes place on May 1 but relates back to the March 1 date. That's incredibly important because your kids will take your house with everything that comes with it, immediately. The mortgage, taxes, insurance, monthly utilities, etc. will all continue to come due. They won't be able to use your money or the money in the estate to pay for those expenses either. What family has a budget that would support the unexpected addition of an extra mortgage payment for a home they don't even live in? Or worse, if you pass in the fall, the tax bill is going to come due in January - that's going to fall squarely on the shoulders of your kids.
Do They Even Want the House?
Some homes may have sentiment to kids, but for the most part your kids - if they are grown - will have their own house and will have no purpose for an additional house, especially if they are splitting it between siblings: each child getting an equal share of an asset you cannot divide without sale. Most kids see the house for it's value, not its sentiment. Families move several times during a child's lifetime, especially an adult child. And even houses with sentiment will likely ultimately be sold by the children.
Make it an Estate Asset
When you leave the house to your kids, they are categorically and without exception prohibited from using your assets to pay for it's expenses. Often I hear clients say "I need Letters Testamentary so I can get access to mom's account to pay her mortgage." Sorry, that's not how it works. You cannot use estate assets to pay for the expenses of an asset outside of the estate. So, if you want your kids to be able to pay your mortgage with your money after you're gone, you should make the house an estate asset. You do that by leaving the house to the executor of your estate with direction to sell the home and disburse the proceeds. During the time between death and sale, the executor can use estate funds to pay the expenses of the house because the executor has a fiduciary duty to preserve estate assets. Failing to pay the mortgage would subject an estate asset to foreclosure, which would deprive the beneficiaries of value from the estate.
Long story short: leave the house to your executor.