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The Risks of Poor Man’s Estate Planning: How to Pass on Property & Avoid Probate the Right Way
It’s often called “poor man’s estate planning” – putting your child on the title to your deed to try to avoid probate. Instead, this method often ends poorly and can even cost more for your loved ones. Keep reading to learn why and what you may be able to do about it.
Risk #1 of Poorman’s Estate Planning:
When a deed is titled in more than one name and the parties are not married, for example a parent and child, the ownership can be categorized as tenants in common – meaning if one property owner dies, their interest then passes to an heir through probate and not directly to the other owner, which is exactly what the estate planning was attempting to avoid.
The deed would have to stipulate ownership as joint tenants with the right of survivorship (or similar language) in order to accomplish this desired objective. Even with this method, if both joint tenants die or become incapacitated at the same time (like in a joint accident) the property will go straight to probate, again what the plan was supposed to avoid.
Risk #2 of Poorman’s Estate Planning:
The property may be put at risk if the child you put on the title to the property has a creditor issue, is sued, divorced or faces some other legal or financial issue.
Risk #3 of Poorman’s Estate Planning:
You could create adverse tax consequences when you title the property in your child’s name. One of the few benefits of death is when your heirs take your property, it is taken at a new basis equal to the fair market value of the property. If it is determined that you’ve made a gift of the property by adding your child to the title, your kids can inherit your tax basis and lose valuable tax savings.
This article is a service of The Solution Law Firm, P.A. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Planning Session, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Planning Session and mention this article to find out how to get this $750 session at no charge.