Buying a home can be a very exciting and stressful step in your life, as it is likely one of the most significant financial investments you have made. Protecting this investment becomes that much more critical as you get older or build a family and want to leave your home to your children or other beneficiaries.

Setting up an estate plan now can be beneficial for two main reasons. First, you can put into writing what you want to happen to your home and other assets in case something happens to you. Second, your estate plan can be critical if you were to become suddenly incapacitated and unable to make important decisions.

Create a will or trust

Passing away without an estate plan in place often leaves your belongings in the hands of the state of California. What the state determines may not be what you have in mind. While developing your estate plan, speak with a lawyer and determine what kind of tax implications there will be when passing your house onto other beneficiaries. For example, a child may be subject to federal gift taxes if you give him or her co-ownership on the home’s deed.

Sometimes, setting up a living trust for your home can provide tax sheltering. Putting other substantial assets into a trust can provide additional benefits, such as avoiding probate. A trust can also allow your heirs to distribute everything within a shorter period rather than potentially months or years in a lengthy and costly probate process.

Plan for your children

If you have children, make some decisions based on their unique circumstances, including their ability to work together and manage finances. Will it be easier if they sell the home and split the proceeds, or does one child want to keep the house and buy the others out? If you have more complex finances and investments, consider appointing a trustee who can manage the assets of your trust and provide regularly scheduled distributions based on each child’s best interests.