Should I Put My Child on My House Title?

Are you thinking about estate planning and real estate and planning to add a child to the house title? Many people may miss out on the possible property tax increases associated with this.

A parent usually would add a child to the title of the parents’ home for estate planning purposes, which means that the parent wants the property to go to a specific child after the parent has passed away. However, failing to consider all of the various estate planning aspects associated with this as well as the tax implications can be especially confusing.

It can be very difficult for parents to handle their estate planning this way since the unintended tax consequences may affect everyone involved. There are other ways to ensure that the title of a person’s home passes down to the children wanted without adding those people specifically to the title. Equality among children seems like a good idea on the surface, such as when a person wants to add multiple children to the title, but there are flaws in this kind of logic. First of all, parents cannot necessarily assume that a child will outlive them. 

A joint ownership of the home could lead one child to become the sole owner of the home. There are often smarter ways for parents to own the property, such as putting the home inside a living trust and determining who will become the owner of the home when the parent passes away.

A living trust takes into account various changes in life that can occur from the day that the trust is structured through when the parent dies. Furthermore, the parent might also put together a will that designates the beneficiaries of his or her estate by naming the individual who will get the home upon the parents’ death. In other cases, you may be eligible to use a transfer on death instrument that designates who is able to receive the home when the parent passes away. Future tax issues should also be considered. A real estate taxing body or your local tax successor officer should certainly be contacted to discuss the relevant issues involved and how to avoid unintended tax consequences that can follow your heirs for years to come.      

Common Reasons A Will Might Not Hold Up In Court

Especially if you have taken it upon yourself to write your will, it’s important to know that you have opened your heirs up to the risk of having your will contested in court later on. Here are three of the most common mistakes that result in a contested will.

Common Reasons A Will Might Not Hold Up In Court
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Disinheriting Family Members Sans Explicit Instructions

The law tends to treat the distribution of assets relatively fairly when there are questions about intention or mistakes in the handling of the will. So, if you’re stipulating that you want to leave an individual out altogether, you need to make sure those instructions are crystal clear. You want to have this written by an attorney to reduce that chances that you have given such an individual room to argue in court.

Using Biased Witnesses During Your Will Signing

In many circumstances, you need to sign your will in front of witnesses in order for it to be valid. These witnesses may later be called I court to state that they were present and to discuss whether the person signing the will (you) had the mental capacity to sign such a document without any undue influence or pressure from other parties.

Potentially Lacking Mental Capacity to Sign the Will

One of the reasons that heirs (or those excluded) will contest a will is under the ground that you did not have the mental capacity to understand what you were doing. You must understand what property you own, your overall plan for passing on property, and who you closest family members are. Furthermore, a Living Trust, which preserves privacy, may be an option for those with a stronger likelihood of a contest in their future.

To learn more about wills and estate planning documents, contact our professionals at 732-521-9455 or info@lawesq.net.

Put Your Trust in a Trust

Now is a great time to evaluate how using a trust can help you achieve your financial goals. The federal gift tax and estate tax laws give big incentives for using trusts in estate planning. In the pasts, trusts have been used mostly to transfer gifts to children while limiting estate taxes on wealth, but there are numerous other benefits.

Put Your Trust in a Trust
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An appropriately funded trust can help ensure that your assets are protected and available in the event that you become incapacitated. When you pass away, that same trust can be used to pass on assets to your beneficiaries. You can also protect your legacy by keeping your assets away from any of the heir’s creditors, too.

There are probate savings and privacy reasons that a trust can benefit you, too. There are potentially large fees for going through probate and your probate records will also be public. Putting your assets into a revocable trust instead can keep them from having to go through probate at death- therefore protecting you and your family’s privacy.

Finally, trusts can be a good tool when you live in a state that has an estate tax. Some states levy estate taxes that are rather substantial, but trust planning is one way to cut down on how many estate taxes will be levied on your death. This can also be a good tool for those who have real estate located in a state that imposes estate taxes.

3 Estate Planning Mistakes From Which To Learn

If you haven’t already done your estate plan, perhaps hearing a few horror stories about people who made common mistakes will prompt you to do it — and do it right.

Last Will And Testament
Last Will And Testament (Photo credit: Ken_Mayer)

An article in the Green Bay Press Gazette, recounts a few cases that detail classic mistakes involving estate planning, or the lack of it.

  • A former Supreme Court justice wrote his own will, using just 176 words. It cost his family $450,000 in estate taxes and court fees because he didn’t take the time to do it right.
  • Lesson: Know what you know, know what you don’t know.

  • A young woman left her assets to her minor son. When she died, she had $1 million in her estate due to a wrongful death claim. Her son died soon afterwards and the money went to his only heir, his father, who was a drug addict.
  • Lesson: She could have put the assets into trust with a contingency plan were he to die, so the money could not go to the father.

  • A father had a stroke and had to go into a nursing home. His children closed his bank account but never went through his mail. After he died, they found a statement for a $1 million life insurance policy. But the premiums had not been paid since the bank account was closed. They didn’t get the money.
  • Lesson: Make sure somebody knows what assets you have, usually the person who has power of attorney, a trustee named in a trust you have set up or the personal representative named in your will.

These are common mistakes that can be avoided if you engage a qualified estate planning attorney to help you with your estate plan.

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Teenager Gets $25 Million Fortune – With One Catch

Actor Paul Walker of Fast & Furious fame, who died in a car accident in November, left his entire fortune of $25 million to his 15-year-old daughter, who had recently left her mother and childhood home in Hawaii to live with him in California.

Paul Walker at the Fast & Furious premiere at ...
Paul Walker at the Fast & Furious premiere at Leicester Square. (Photo credit: Wikipedia)

Walker did not leave a dime to any other family members or even his girlfriend.

But Walker’s will did have one catch. His daughter, Meadow, will not be able to touch the money until she becomes an adult. Nothing unusual there, except that Walker named his own mother to be Meadow’s guardian.

According to an article on cafemom.com, this is a bit unusual and could be tricky. One wonders why he named Meadow’s grandmother as her guardian rather than Meadow’s own mother, Rebecca Soteros.

However, the matter will be decided by a judge later this month. In the meantime, Meadow is back in Hawaii living with her mother.

Walker was a very private person and not much is known about the circumstances of his breakup or the decision to have Meadow come live with him in California.

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Hoffman’s Will Raises Legal Issues

Actor Phillip Seymour Hoffman, who died of a drug overdose in February, had not updated his will in years. The mistake could prove troublesome for two of his daughters and their mother.

Philip Seymour Hoffman won a Academy Award for...
Philip Seymour Hoffman (Photo credit: Wikipedia)

The will was signed in 2004 when the actor had just one child, Cooper, now 11. But he subsequently had two daughters, Tallulah and Willa, neither of whom are mentioned in the will.

This may or may not be a problem.

The award-winning actor, who was just 46 when he died, left everything to his longtime companion, Marianne O’Donnell, the mother of his three children. But that’s just the beginning of the story, according to an article on Forbes.com.

Since Hoffman and O’Donnell were not married, she does not get any of the estate tax breaks available to spouses. You can give an unlimited amount to your spouse during life or in an estate plan, with no federal or state tax applied.

Hoffman was worth an estimated $35 million at the time of his death. The federal estate tax exemption is $5.3 million, but the rest is taxed at up to 40 percent. New York has its own estate tax of up to 16 percent for non-spouses, with a $1 million exemption.

In all, Hoffman’s estate will be taxed at more than $15 million. And since they were not married, any assets that remain at O’Donnell’s death would be taxed again.

There may be a way out for O’Donnell, however, The will allows for her to turn down all or part of her inheritance and put it into a trust. Any assets that go into the trust bypass her estate and cannot be taxed when she dies.

But the fact that only Cooper was mentioned in the will, complicates the matter. The will provides that he get half the principal of such a trust when he turns 25 and the other half when he turns 30. However, the law of New York and most states protects children not named in a will that has not been updated from being disinherited.

The article suggests that O’Donnell, who is the executor of the will, should appoint a guardian to represent the two sisters.

Other matters that could complicate matters include if Hoffman had set up a retirement account or a life insurance policy.

But all the confusion could have been avoided if Hoffman had included a clause in the will stipulating that any reference to Cooper includes any other children born after him.

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LGBT Estate Planning

Estate planning is especially important for those who put a large amount of time and energy into cultivating their wealth. Additionally, investors within the Lesbian, Gay, Bisexual and Transgender community have unique estate planning needs that should be addressed by an estate planning professional. According to a recent Spectrem Millionaire Corner Study, fewer LGBT investors have estate plans in place than their non-LGBT counterparts.

Rainbow flag (LGBT movement) LGBT (lesbian, ga...
LGBT (lesbian, gay, bisexual, transgender) Pride flag (Photo credit: Wikipedia)

The study revealed that only sixty-three percent of LGBT investors have executed a last will and testament, and only fifty-four percent of LGBT investors have executed a living will. Both of these documents are vital pieces of an estate plan, as a last will and testament allows a person to control the disposition of his or her assets, while a living will allows a person to control the end-of-life medical care he or she receives.

Although the percentages of LGBT investors with various estate planning documents rise with the wealth of the investor, they never reach the percentages of their non-LGBT counterparts. This is not only true for the execution of a last will and testament and living will, but for the creation of trusts as well. At the time the study was conducted, only eight percent of LGBT investors had an irrevocable trust in place.

Estate planning is particularly important for LGBT investors if they wish to have a comparable level of control over the disposition of their assets at death as their non-LGBT counterparts. Accordingly, LGBT investors are encouraged to seek able counsel to formulate an appropriate estate plan for their needs.

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