Mistake #6: Putting your Children on Title to your House
Too many people try to help their children and end up in a predicament. Here are a few situations that are well covered by an activerain colleague that we want to share with you.
"What You Must Know to Protect Your Family and Your Estate: The Ultimate Guide to Estate Planning for California Families" by Brenda Geiger, Esq. (Geiger Law Office, P.C.) and Myrna Arroyo, Esq., Myrna E. Arroyo, LLC. is a handy little guide that packs some powerful punches.
Geiger and Arroyo give case examples of "The 25 Most Common Estate Planning Mistakes" that they have witnessed in their careers. "Mistake #6: Putting your Children on Title to your House" on page 11 is a very common mistake that I come across in my real estate business. This is very dangerous because it puts your assets MORE at risk, NOT less. Geiger says:
"When you put your home (or any other asset) in co-ownership with your children, they become co-owners of the property with you. This causes several problems.
"First Problem: Putting your home in joint tenancy with your children is a taxable gift under IRS regulations. This means you have to file a gift tax return for the year in which you made the transfer if the value of the interest transferred to each child is more than $12,000.
"Second Problem: If your child has any lawsuits against him or her, or is going through a divorce, or has a tax lien filed against them, you may find out that you no longer own the house with your child, but with your child's creditors. They can actually foreclose on (force the sale of) your home to get at your child's fractional share.
"Third Problem: When you go to sell the home, you can use your primary residence capital gains exclusion ($250,000 for individuals and up to $500,000 for married couples) only on your fractional share. Each of your children may have a LARGE long-term capital gains tax bill to be paid that could have been totally avoided if the house had still been titled in just your name."
Ms. Geiger is an awesome attorney who truly cares about helping her clients. She doesn't use off-the-shelf generic trusts, but takes the time to get to know each client individually and crafts a specific plan just for each family! Her services (and her book) are highly recommended. You can find out more about Geiger's Law Office at http://www.geigerlawoffice.net/ or purchase the book at http://www.geigerlawoffice.net/books.html
Regina P. Brown
Broker, Realtor®, e-Pro
Author of eBook "Stop Foreclosure Fast: Solutions to Save your House"
Author of forthcoming book, "Virtual Office Guide for Business Professionals: Work & Profit from Home"
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Text copyright © 2009 R.P. Brown, All Rights Reserved
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