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Real Estate & Other Valuables

A primary residence and physical possessions are commonly inherited items.

How real estate and valuable possessions transfer

If you own a home, other real estate, or valuable possessions such as antiques, you should include these in your will.

Do real estate and other valuables go through probate?

YES, these assets often go through probate. Valuable possessions usually do, whereas there are more options for real estate to avoid probate. If the asset is jointly owned, it will go through probate only upon the death of the second owner.

NO, if you put these assets into a trust, they may not need to pass through probate. Some states also allow transfer on death deeds, which allow for the direct transfer of real estate.

These types of assets will most likely need to have their value assessed and then be included in your taxable estate. While there are options for keeping real estate outside of the probate process—such as trusts, joint ownership, or transfer on death (TOD) deeds—it is usually less avoidable for valuable possessions.

When considering how your beneficiaries will be affected by inheriting real estate or other illiquid items, first determine how many beneficiaries you plan to name. Then also consider that the asset—if you are naming multiple beneficiaries—may have to be titled to each of the beneficiaries separately, or sold and the proceeds divided.

You might also want to factor in the potential capital gains taxes your beneficiaries may have to pay as a result of a possible sale.

Steps to potentially minimize taxes and avoid probate

Just about anything can be placed in a trust; however, there are specialized trusts for real estate, such as a qualified personal residence trust (QPRT). A QPRT can remove the property from the estate and avoid federal estate tax, as well as allow you to continue to live in the residence for a predetermined period of time.

The value of the property is adjusted to reflect the time you live there, helping to mitigate gift taxes. You must, however, outlive the term of the trust to realize the tax savings.

You might also consider naming another joint owner on the property now, so that it will pass directly to the second owner. Another option, for states that allow it, is a transfer on death deed, which is a legal document showing ownership that allows for the naming of a beneficiary. The property would pass immediately to that beneficiary upon the death of the owner, generally outside of probate.

Next step

Reviewing & updating your estate plan
Keeping your estate plan up to date is just as important as creating it.

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transfer on death (TOD) deed

legal document that conveys title to a property and has a provision for the transfer of the property to another person or persons immediately upon the death of the owner(s)

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illiquid

refers to a noncash asset that cannot be sold quickly or easily without the risk of loss in value

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qualified personal residence trust (QPRT)

trust whereby the grantor retains the right to live in the personal residence held in trust, with the residence passing to the beneficiaries at the end of the selected term; it may reduce gift and/or estate taxes by taking advantage of the difference in value of the property when it is transferred to the trust versus when it is distributed to the beneficiaries

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The tax information and estate planning information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. Fidelity does not provide legal or tax advice. Fidelity cannot guarantee that such information is accurate, complete, or timely. Laws of a particular state or laws which may be applicable to a particular situation may have an impact on the applicability, accuracy, or completeness of such information. Federal and state laws and regulations are complex and are subject to change. Changes in such laws and regulations may have a material impact on pre- and/or after-tax investment results. Fidelity makes no warranties with regard to such information or results obtained by its use. Fidelity disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Always consult an attorney or tax professional regarding your specific legal or tax situation.

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