Q: I want to add my child’s name to the title of my home, so they can keep the house out of probate and receive my home quickly after my death. Do you see any concerns with my plan?
A: The answer to your question is a solid “maybe”. Your personal circumstances will dictate whether this estate planning strategy is the best move for you.
Adding your child’s name to your deed could speed the transfer of your home to your beneficiaries and keep it out of probate. But, before you run off and put your child’s name on the title of your house you should consider a few of these risks.
Gift Taxes. By adding your child to the title of your home, you have made a gift that is subject to gift taxes. The gift is likely far below the current federal gift tax exclusion amount, so you shouldn’t have to pay gift taxes. However, you may need to file a gift tax return if the gift is over the annual exclusion amount.
Medicaid benefits. If you need KanCare (Medicaid) assistance to pay for nursing home care within 5 years of adding your child’s name to the deed, you could be penalized when requesting benefits.
Child’s Death. If your child dies before you, his/her interest in your home becomes part of his/her estate. This interest in your home will be subject to his/her liabilities and would pass to his/her beneficiaries as named in your child’s estate plan. Someone you don’t know or trust could become the new co-owner of your home.
Disagreements. If you decide to sell the house and move, your child could legally refuse to transfer ownership back to you. Also, if your child wants to sell your home, that child could force a partition action, a sale of the real estate done through the court.
Child’s creditors. If your child is involved in a serious accident, your house could have a lien placed on it to cover his/her debts not covered by insurance. Similarly, if your child is a joint owner, the value of the home could be subject to his/her creditors, should they face bankruptcy or credit issues.
Child’s divorce. If your child gets a divorce after being added to your deed, his/her interest in your house may be part of the divorce settlement.
Capital gains tax. If you sell the home after adding your child to the deed, your child may encounter unintended capital gains tax problems.
No legal obligation. If you add one child’s name to the deed and instruct him/her to share the proceeds from the sale of the home with your other children after your death, they may not be legally obligated to do so. Your other children could be cut out of the inheritance that you intended for them to have.
The type of ownership that you give to your child is a very important factor in your considerations. Should you establish a joint tenancy with rights of survivorship (JTWROS), a tenancy in common (TOC), or perhaps you should do a transfer on death deed? Consulting an experienced estate planning attorney prior to adding anyone to your deed will inform you of the pros and cons of each option, as it relates to your personal circumstance. Without adequate counsel, the complications that could arise from such a move may outweigh any possible benefits.
For more information on estate planning, probate or real estate matters, contact Davis & McCann, P. A., Dodge City, KS. We are members of Wealth Counsel, a national consortium of Estate Planning Attorneys and Elder Law. We focus our practice on providing clients with the best legal advice on Estate Planning, Probate, Trust Administration, Medicaid and Long-term Care Planning, Family Business/Small Business Succession Planning, Real Estate Transactions, 1031 Exchanges, and related matters.
If you want your estate plan to be as comprehensive as possible so your family is provided for after your death in the way you intend, there are some key issues you may need to include in your plan. During our 20+ years of estate planning work, we’ve seen some of the same mistakes in estate plans drafted by inexperienced attorneys or online computer-generated forms. Those mistakes generally appear as omissions of language addressing tax planning, incapacity, divorces, spendthrift beneficiaries, beneficiaries with substance abuse issues, or the possibility of a beneficiary receiving government benefits. Here are the most common issues we’ve seen overlooked and that you may need to address in your own estate plan:
Federal Gift and Estate Taxes
Federal Gift and Estate Tax is a tax on the wealth you accumulated or transferred during your lifetime. This tax typically is paid during the probate of your estate or administration of your trust. Too often we see clients’ families pay more taxes than necessary because simple tax planning language was omitted in their estate plans. After a thorough review of your assets and consideration of your life circumstances, a good attorney will recognize if there is a need for special tax protection language in your estate plan. This language easily can be added to your estate plan and will protect your beneficiaries from potentially hefty and unnecessary taxation.
Powers of Attorney for both health care and financial needs are the most basic and essential parts of a good estate plan. Yet, routinely, we meet with clients whose prior estate plan does not include either a Health Care Power of Attorney or a General Durable Power of Attorney. Anyone over the age of 18 should have a Power of Attorney for both health care and financial needs. Without these documents, the State will make decisions about your health and assets should you become incapacitated. If your attorney does not offer these as part of their estate plan package, you should be concerned.
No one plans on a divorce when they get married, but it happens. For individuals with an existing prenuptial agreement, your estate plan should reference this agreement and comply with its terms. This is especially important with second marriages involving children. If you have a beneficiary that may be headed for a divorce, then you may want to offer them certain protections within your estate plan to keep your family assets from being distributed to your beneficiary’s soon-to-be ex-spouse.
Everyone wants to believe their loved ones are perfect, but that’s not reality. Nearly every family we see seems to have a spendthrift, someone who simply cannot manage money for one reason or another, or a family member who struggles with alcohol, drugs or gambling. Fortunately, you can provide for beneficiaries who cannot or should not manage money. Additionally, you may have a beneficiary who is receiving governmental benefits. If such a beneficiary were to inherit your assets outright, there is a chance that they would no longer be eligible to receive their government benefits without first spending down the inheritance that you left to them. There are ways to avoid this by utilizing trust planning. Within your estate plan you can appoint a trustee to manage and distribute funds to these beneficiaries, according to your wishes. If your family members struggle with money management for one reason or another, or are receiving government benefits, you should ask your attorney if a trust might be warranted.
To provide your beneficiaries with the smoothest transition after your death, we recommend having your estate plan reviewed every 3-5 years by an experienced estate planning attorney. This includes a review of your Will, Trust, Trust funding documents and assets, Powers of Attorney, HIPAA Authorization, Living Will, and Prenuptial Agreement. If you are a business owner, this review should also include your insurance policies, corporate formation documents, annual minutes, and Buy-Sell Agreement.
If you have questions about your existing estate plan or new estate planning options, please give us a call. At Davis & McCann, P. A. our focus is to provide the best legal advice in estate planning, farm family estate planning, Probate, Trust Administration, Medicaid and Long-term Care Planning, Family Business/Small Business Succession Planning, Real Estate Transactions, 1031 Exchanges, and related matters.
Having a will is the most basic step you can take in planning your estate. Without this document in place at your death, your State law could dictate how to divide your material possessions, who will care for your minor children (in the absence of a surviving spouse), what age those children will receive access to their inheritance, and who will be responsible for selling or distributing your items of value.
Despite these facts, nearly six in 10 adults in the U. S. still do not have a will. In our experience, most parents with children under age 18 have done little or no basic estate planning. The problem, according to Megan L. McCann, estate planning attorney and partner at Davis & McCann, P. A., likely centers around two facts: One, young adults rarely consider the possibility of their death and two, many people assume they have insufficient assets to require estate planning.
According to McCann, most Americans undervalue the assets that must be sold or distributed at their death. “Regardless of your age or the size of your bank account, it is very important to have an estate plan in place. After your death, decisions must be made about your debts, bank accounts, real estate, stocks and bonds, vehicles, jewelry, retirement accounts, insurance proceeds, securities dividends, and even pets. If you want a say on who will receive your assets and how or when they will receive them, putting a plan together is necessary.”
If you have children, McCann says having a will is critical, if for no other reason than to name guardians for your minor children. “In the absence of a will where you appoint a guardian, the State will decide who should care for your children after your death,” McCann says. “Part of our responsibility as parents is to protect our children and provide a safe future for them. By naming a guardian in a will, you can control who provides that protection and safety for your children, if you are no longer able. Equally important is the need to have financial and health care powers of attorney appointed to act on your behalf should you become incapacitated and unable to do so.”
“Tragedy isn’t part of anyone’s life plan,” says McCann, “However, young adults, rich and poor, with and without small children, die every day. The real tragedy is that most of them fail to put a plan in place stating their desires for guardianship of their children and distribution of their assets. This leaves a tremendous burden on the surviving spouse or family.”
For more information on estate planning, contact Davis & McCann, P. A., Dodge City, KS. We are members of Wealth Counsel, a national consortium of Estate Planning Attorneys and Elder Law. We focus our practice on providing clients with the best legal advice on Estate Planning, Medicaid and Long-term Care Planning, Family Business/Small Business Succession Planning, Probate, Trust Administration, Real Estate, 1031 Exchanges, and related matters.
When you need to put assets into your Revocable Trust, there are several ways of accomplishing this depending on the type of asset. Let’s break it down so you can easily see how to go about making these transfers.
You can do much of the funding work for your Trust on your own. If, however, you do not have the time, or the desire to do such, contact your estate planning attorney who can assist you with this process.
For more information on funding your Revocable Trust, contact Davis & McCann, P. A., Dodge City, KS. We are members of Wealth Counsel, a national consortium of Estate Planning Attorneys and Elder Law. We focus our practice on providing clients with the best legal advice on estate planning, Medicaid and Long-term Care Planning, Family Business/Small Business Succession Planning, Probate, Trust Administration, Real Estate Transactions, 1031 Exchanges, and related matters.
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