At Highland Title + Escrow, we provide more than just smooth settlements. Today, we would like to share some knowledge about who owns a property when there is a trust or estate!
Trusts and wills are documents used to legally protect and transfer assets, real estate in this case, to Beneficiaries and Heirs. While each of these has their place, it is important to know the difference, which is the right one for you, and how to be prepared when the time comes.
Trusts can be put into place during a person’s lifetime, are valid when death occurs and are often used when you want your finances allocated according to your wishes. It should include the specifics of the property, the individuals named as the assigned roles, the purpose of the trust and how it is to be carried out. An attorney can assist and ensure it’s set up correctly. An established trust can keep your property from going to probate, a legal proceeding that could tie up the property for an extended period of time.
Essentially, a trust involves three parties – the Trustor, the Trustee and the Beneficiary.
- The Trustor: The Trustor is the person whose property is being transferred to the Trustee. The Trustor can be known as the Settlor or Grantor.
- The Trustee: The Trustee is a person or institution (also known as Fiduciary) who manages the property/assets for the Beneficiary, and the proof is in the title. You want your Trustee to be someone you trust explicitly. You may also hear Co-Trustee which applies if there is more than one Trustee or Successor Trustee who takes the place of the previous Trustee.
- The Beneficiary: The Beneficiary is the person entitled to receive the benefit of the property based on the trust arrangement.
Once the trust is established, the Trustee owns, manages and holds the legal title to the documented property. While the Trustee is considered the legal owner, they are ultimately responsible for carrying out the terms of the trust on behalf of both the Trustor and the Beneficiary.
Now, let’s turn to estates. A property is in an estate when the owner has died, and there is no survivorship or trust in place. A person who dies with a Last Will and Testament is said to have died testate. A person who dies without a Last Will and Testament is said to have died intestate.
When a person dies testate (a situation where a will is in place), unless the will states otherwise, the title/ownership shifts immediately to the named Devisee(s) in the will The Devisee becomes responsible for the costs associated with owning real property, such as taxes, insurance and upkeep. The Devisee could be one person or split among multiple people as deemed by the will.
When a person dies intestate (no will is in place), the Heirs are defined by the laws of Intestate Succession as follows in Virginia (VA Code):
- Virginia Decedent’s Estate passes to the surviving spouse (if decedent had no children other than with surviving spouse). Otherwise, the division is ⅓ spouse and ⅔ children.
- Then parents, siblings, grandparents, next of kin, finally escheated to estate.
- Heir may renunciate (pass to the next heir in line) for tax reasons.
A list of Heirs and/or a real estate affidavit needs to be filed or recorded in the county where the real estate is located. All Heirs will be required to sign and convey title. If there are minors involved, court action is required, and notification of death should be made to the deceased’s title company as soon as possible.
If this all makes sense to you, we appreciate the time you took to read along! If you still have questions concerning trusts and estates, you can contact us, give us a call at (703) 723-3300.