They call it the poor man’s estate planning. Put your child on the title to your deed and avoid probate. Yet this poor man’s planning often ends up, well, poorly; and costing a lot more for the people you love. Here are some risks and solutions to this poorman’s estate planning:
Risk #1 of Poorman’s Estate Planning: If the deed is titled with the name of parent and child (or any time there is more than one name on title and the parties are not married to each other) ownership of the property could be categorized as tenants in common– meaning that if one property owner dies, his or her interest in the property goes to an heir via probate, not directly to the other owner(s). That’s exactly what the Poorman’s estate planning was trying to avoid.
Solution: To accomplish the desired objective, the deed would have to stipulate ownership as joint tenants with the right of survivorship or similar language. Even then, passing property outside of probate using a deed may create problems because if both joint tenants die or become incapacitated at the same time (such as in an accident) the property is headed right into probate.
Risk #2 of Poorman’s Estate Planning: If the child you put on title to the property is sued or has some other type of creditor issue, even divorce, the property could be at risk.
Risk #3 of Poorman’s Estate Planning: Gifting property to your children, which is what happens when you put a child’s name on title to your property, could create adverse tax consequences. One of the benefits of death (probably the only one) is that your heirs take your property at a new basis equal to fair market value of your property. This may not happen if you’ve added your child to the title of the property if it’s determined that you made a gift of the property, your kids inherit your tax basis and lose valuable tax savings.
It’s not the size of your estate that makes it a Poorman’s Estate Plan, it’s the risk you leave to your heirs – the very people you are trying to protect. Call Pierchoski Estate Law for help with an Estate Plan that will protect those you love. 941.363.7222.
A Note from the Attorney, Stan Pierchoski:
The practice of law is a second career for me. After obtaining Master of Science degrees in both Nuclear and Mechanical Engineering, I worked in the Nuclear Power Industry for 15 years. Always having an interest in law, I attended and graduated from law school and founded the Pierchoski Law Firm in 2002 in Pulaski, TN. For several years I practiced as a criminal defense, trial attorney. After my parents passed I became interested in Trust and Estate Law and felt a strong calling to change my practice to the Estate Planning area.
For years I have been exclusively doing trust writing and wealth planning and have become proficient at it. Over the last several years my practice has evolved to serve all age groups including elders and Medicaid Planning. I am always open to your questions and am more than happy to chat with you about your concerns so give me a call or stop by my office. You’ll be glad you did!