Important Documents for Home Buying
The paperwork will be extensive and tedious, but it is important to be aware of the documents that need to be filed when you are purchasing a new home. It is not just about the house, but also about leaving your assets to the appropriate people in the instance of death. Here are some options for protecting your assets and your family, in life, and for the years to follow:
- The Will-
The will is a document that must be filed with the probate court upon the death of the testator. This process can be both timely and expensive. A person uses a will to allocate whom he or she will leave their estate and assets to upon their death. In the instance of same sex partnerships, this would be a preferable way for one partner to ensure the other partner receives any and all intended assets.
A trust is created when property is transferred by one party, the settlor, to be held by another party, the trustee, for the benefit of a third party, a beneficiary. The beneficiary, either immediately or in the future, will receive income or property from the trust. Trusts are more difficult than wills to contest in court, which will help to protect the survivor from family members of the deceased. However, if you elect to take this route in insuring your assets, you must be thorough because anything that’s not named in the trust will be subject to probate.
- Living Trusts-
A living trust is a trust created and in effect while you are still alive, rather than a trust created at your death. Living trusts are a type of trust that is often used by same sex couples who are in an unmarried partnership. These trusts name the beneficiaries who will receive any assets and the trustee who will divide and allocate said assets upon death.
- Transfer on Death Deed-
A transfer on death deed allows a property owner to directly transfer the ownership of real estate at the owner’s death to whomever the owner designates by name. This is an affidavit, which relinquishes full ownership of the property to the surviving partner upon death. The beneficiary can be changed at any time while the holder is alive, so along with a will, a transfer on death deed is a convenient document to have on file.
- Cohabitation Agreements-
A cohabitation agreement is a contract that both parties enter into in order to express their rights and obligations to one another while they coexist on the same piece of property. This is a business arrangement that is financially effective, especially if both parties involved are of similar financial worth. Even if the relationship fails, under the terms of this agreement, the parties may still be required to support one another.
You and your partner have the option to form a Limited Liability Company/ Partnership, so that you will own your property and home as business partners. In states where same sex marriage is not permitted, this method will help you and your partner to avoid double taxation on your assets and property. You both will own the property equally and will be able to transfer assets back and forth, as well as to your children (regardless of biological ties).
This process can be difficult and tedious. There are initial filing requirements and fees that would not accompany some of the other options in this guide. LLCs and LLPs also need to file articles of organization and include a business description in their application. They must also register with the IRS and the state department of revenue. Some states (including Connecticut) require the owners to obtain workers’ comp insurance even if they do not hire any employees.
- Domestic Partner Agreement-
This is a written agreement that establishes property rights. A domestic partner agreement is especially important if you and your partner don’t have a joint partnership agreement. In the event of a break up, this agreement will address questions like:
- Does the house have to be sold?
- Can one partner buy out the other?
- If the house cannot be sold, should both partners contribute to the mortgage to preserve their credit?
- If the house is sold, but one partner had contributed more financially, how will the proceeds by divided?
There are plenty of questions that could, and most likely will, be asked if a relationship comes to an end. If you and your partner predetermine the answers to these questions as a precaution, then you will save yourselves a lot of excess stress.