Lawyers call it “poor man’s estate planning.” You may think it is easier to put your child on the deed of your house and avoid probate. Yet this poor estate planning often ends up, well, poorly, and costing a lot more for the people you love. Here’s why and what you can do to avoid ending up in the “poor house.”
- Risk of “Poor man’s Estate Planning.” If you put your child on the deed of your house (or any time there is more than one person on a deed and the parties are not married to each other) ownership of the property could be categorized as tenants in common. This could mean that if you die, the property may not go to child on the deed, it may go through probate and go to your heirs – this is exactly what you were trying to avoid.
Your solution: To accomplish your desired result, the deed would need to be titled in joint tenancy with right of survivorship or some similar language. But even still, problems could ensue. What if both joint tenants die or become incapacitated? The property is headed right back into the probate court – the undesired result.
- Risk of “Poor man’s Estate Planning.” What happens if the child you have added to your deed gets sued or has a creditor issue? Gets divorced? Your property could be at risk.
- Risk of “Poor man’s Estate Planning.” If you decide to gift your property to your children by putting their name on the deed, you may have created adverse tax consequences. One of the few benefits of death is that your heirs may get a “step-up” in basis on the property. This may not happen if you’ve already added them to the deed. If you’ve gifted it to them, they may be stuck with your lower basis and lose valuable tax savings.
If you want to learn more about strategies for protecting your assets and avoiding probate, visit our website at Truestlaw.com or call us at 480 949-6500 to schedule a Family Wealth Planning Session. We normally charge $750 for a Family Wealth Planning Session, but because this planning is so important, we’ve made space for the next two people who mention this article to have a complete planning session at no charge. Call today and mention this article.