Why You Should Not Put Property In Your Child’s Name As Part Of An Estate Plan
A good portion of parents with children eventually want to pass on the property they own to their children. Some might think that it is a good idea to put their real estate, home, property, or land in the name of their children while they are still alive. This type of estate plan can be easy to set up and can most likely be done without a lawyer, but it is full of dangers and risks that can pop up and bite you if you are not careful.
Titling your property with a child jointly or what is called in most states joint tenants with right of survivor-ship is an easy way to pass on property to that child. When you die, the property automatically passes to that child without having to go through the probate process. The title must simply be changed from joint ownership to that child’s name after you die and the title will then be in that child’s name. There are numerous reasons why doing this could be a bad idea though. One of the most common reasons that joint ownership with a child may be dangerous is that the child has an ownership interest in the property before you die and this interest could be subject to divorce proceedings, the IRS, or other creditors that your child may have. Your ex son or daughter in law or your child’s creditor can assert their interest in your property while you are still alive because the property is in your child’s name. Your child could be entitled to force you to sell your house if they feel that you are unable to care for yourself anymore and would be able to share the proceeds. Your child could also move their family in with you and become permanent guests.
In Most States It Takes Work To Disinherit a Spouse
The goal for some in a marriage is to make sure that the person they marry gets no inheritance from them when they die. This goal may seem harsh at first glance, but there may be good motivations behind it such as already having kids from previous marriage, a significant age difference in spouses, or wanting to give everything to charity. Whatever the reason it takes work to leave a spouse with nothing in most states and cannot be done with a simple will.
If you live in one of the community property states, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin, there is little that can be done to disinherit someone you are married to. In these states the spouse will most likely receive half of the estate regardless. If you live in one of the forty other states you can disinherit, but it will take some work. In most states you may disinherit your children or other family members very easily by just making a simple will, but your spouse is a different story. In these states just because you name your spouse in a will and do not leave the spouse anything or set up a revocable living trust and leave the spouse out of it does not necessarily mean the spouse will not get any of the estate. In most states there is a statutory elective share that allows the spouse to claim a percentage of the probate estate and maybe even assets in a revocable living trust.
Methods to Safeguard Inherited Property and Lessen Family Disputes
Have you ever inherited property from a deceased relative? If so, chances are it was a bittersweet process. One on hand it’s great to have items that belonged to a loved one, but on the other it’s sad they are no longer around.
There’s little doubt receiving inherited assets can better your life, especially when it’s lump sum cash or valuable property. However, being a beneficiary can sometimes result in family disagreements that lead to inheritance wars.
As a probate liquidator, I spend a lot of time in courtrooms to buy assets sold through auctions. There are many reasons estate agents sell assets. The most common is to sell property to pay off decedents’ outstanding debts. Another is to cover costs of legal fees caused by heirs contesting the Will.
When family disputes over property occur there is probability that heirs will initiate a lawsuit against the estate. I’ve sat through enough court sessions to realize there are times when heirs truly were entitled to valuable property that wasn’t bequeathed in the Will. I’ve also witnessed many frivolous claims that did nothing but destroy family relations and bankrupt the estate with legal costs.
While writing a Will is one of the best methods for safeguarding inheritance gifts, there is estate planning strategies that can reduce risk of having the Will contested. A few well-known methods include: inserting a no-contest clause within the Will; transferring assets to a trust; and setting up assignment of beneficiaries.
A no-contest clause essentially claims that if heirs contest the Will they agree to forfeit any property gifted to them. A more drastic measure is to insert a disinheritance clause which explains why the heir was written out of the Will. Most people would never think of disinheriting a relative, but there are times when it is necessary.