What Not to Do With Your Home
Many people make an estate planning mistake by giving their homes to their children to avoid probate.
People who have heard horror stories about the probate process almost always want to avoid probate in their own estates. There are good and bad ways to do that.
One common bad way to avoid probate is to give a home to a child while the parents are still alive. This is an especially bad idea if the parents are still living in the home.
It seems simple enough. All that needs to be done is to transfer the deed to the property and it belongs to the child. It does not have to go through probate after the parents pass away.
Unfortunately, the home is now subject to the whims of the child and any creditors the child might have.
Should the parents and child have a falling out, then the child can evict the parents. This, sadly, actually happens sometimes. Should the child face debts that cannot be paid, creditors could force a sale of the home.
Even for families that consider these possibilities remote, the tax consequences need to be considered. By transferring the property during life, the child, in most cases, will have capital gains to pay when the property is sold-- taxes that could have been avoided if he property had been given to the child at death through a will or trust.
There are better options, as The New York Times recently discussed in "Leaving a Home to Heirs While You're Still Alive."
The best thing that can be done is to schedule an appointment with an estate planning attorney. These are the experts who know about the probate process and how to avoid it, when necessary.
It might turn out that the probate process is not that bad in your state and that you have no reason to fear having your home go through it.
In those cases, a will would be a good option.
However, for some other people and in some other states, it might be desirable to avoid probate completely.
An estate planning attorney can assist you to do that by creating a trust.
Reference: New York Times (Aug. 25, 2017) "Leaving a Home to Heirs While You're Still Alive."