- Our Team
September 20, 2022
Many people believe that an easy way to avoid probate and enable your children to assist you as you age is to add your children to your bank accounts and even the deed to your home. But this strategy doesn’t always work as planned.
Suppose your child causes a severe car accident. Your account can get pulled into your child’s lawsuit. When you place your child on your deed or bank accounts, you’re legally giving them partial ownership of your property. What if your son or daughter gets divorced or files bankruptcy? Their creditors can take your property.
And how about taxes?
If you add your child’s name to your property as an estate planning technique, your child will miss out on a huge tax break called stepped-up basis at death. For assets valued at the date of your death, your heirs are taxed only on gains realized from the time of your death.
Adding your children’s names to property deprives them of the ability to qualify for the stepped-up basis. Although putting your child’s name on assets seems like a very simple and inexpensive estate planning technique that ensures your son or daughter receives your home when you pass, the scenario can cost more than you think:
You won’t be able to sell the home or refinance your mortgage without your child’s permission. Technically, though, your child could sell shares of the property without your consent.
It happens quite often — a child’s ex-spouse or creditors take the parent’s property. But such scenarios are easily avoided. There are more effective estate planning tools to help avoid or limit your exposure to these situations. An experienced attorney can ensure your wishes are honored without the costs and risks associated with putting your children’s names on your deed and other assets.
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