This is part two of our article, 5 Reasons NOT to transfer Your House to Your Child.  We frequently, very frequently, receive a request to help a client transfer her house to a child.  Often when a client is widowed and/or become elderly, she often wants to make things easier when she passes and looks to avoid inheritance taxes. 

IF THIS SOUNDS FAMILIAR TO YOU, STOP!  THERE ARE 5 REASONS NOT TO TRANSFER YOUR HOUSE TO YOUR CHILD.

• Loss of Control

If you transfer your house to your child, it means that you no longer own your own home.  This is a total loss of control. 

This means your child can sell the property without your permission or move into the home (with his 3 sullen, yet extremely loud, teenagers.) 

If your child has or develops a drug, alcohol, or gambling problem or becomes otherwise estranged, he can take your house.

• Subject to Your Child’s Creditors

If your child owns your house, it can be seized by his creditors.  For example, your house could be taken by your child’s divorcing spouse, bankruptcy, business failure, medical crisis, malpractice lawsuit, and car accident lawsuit.

• Unintentional Disinheritance

If you put one child’s name on the deed of your house, that is a gift to that child.  Your other children are not entitled to any portion of that house.  So, you are disinheriting them as to the house, no matter what your will provides.

Please be sure to check out part 1 of this 2 part article.  And, if you have any questions or concerns about the transfer of your home to your child, call our office for a free, no obligation consultation.  (619-696-0778)

Legacy APC, A Trusts & Estates Law Firm is a member of the American Academy of Estate Planning Attorneys.

We frequently, very frequently, receive a request to help a client transfer her house to a child.  Often when a client is widowed and/or become elderly, she often wants to make things easier when she passes and looks to avoid inheritance taxes. 

IF THIS SOUNDS FAMILIAR TO YOU, STOP!  THERE ARE 5 REASONS NOT TO TRANSFER YOUR HOUSE TO YOUR CHILD.

• Carryover Basis

When you give your house to your children, they receive your basis.  Basically, this means that if you bought your house for $200,000, that is you basis.  So, upon lifetime transfer, your children have a $200,000 basis in the house.

When they sell the property, they will have to pay capital gains tax on the difference between their basis and the sale price.  For example, your children sell the house for $500,000.  They will pay capital gains on $300,000 which is $45,000 (long term capital gains is 15% in 2011.)

On the other hand, if the house is transferred to your children at your death, your children receive a full step up on basis to the date of death value.  So, in our example, your children would have a $500,000 basis and no capital gains taxes would be due.

Although, inheritances taxes will be due, they are less than capital gains taxes.

• Disqualification for Medi-Cal

If you transfer your assets, including your house, to your children without fair consideration (i.e. being paid its value), you will be disqualified from Medi-Cal.  This is especially important if you will need governmental assistance to pay for nursing home care within the next 5 years.

Please be sure to check out part 2 of this 2 part article.  And, if you have any questions or concerns about the transfer of your home to your child, call our office for a free, no obligation consultation.  (619-696-0778)

Legacy APC, A Trusts & Estates Law Firm is a member of the American Academy of Estate Planning Attorneys.

If you’re like most people, you’ve heard of the annual gift tax exclusion of $13,000.  This means that you can give away up to $13,000 to anyone and everyone each year and not pay gift taxes.  So, the answer to the question, “Can I give my child $13,000 without paying any gift tax?” is “YES!”

However, if you can comfortably afford to give away more than $13,000, you need NOT be limited by the $13,000 annual exclusion amount.

Here are 5 ways to give away more than $13,000 to your child without paying any gift tax:

• If you are married, you and your spouse can “split gifts.”  This means that your annual gift tax exclusion is doubled from $13,000 to $26,000 per recipient. 
• In 2011 and 2012, you can give away up to $5,000,000 without incurring gift tax.  This number is doubled to $10,000,000 if you’re married.
• You can pay unlimited medical expenses directly to the provider for anyone.
• You can pay unlimited tuition expenses directly to the provider for anyone.
• Create a grantor trust for your beneficiaries and pay the trust’s income tax.

Two important gifting rules:

• Never give away more than you can afford.  Your sense of security and well-being are more important than any other goals.  You must be able to sleep at night.
• If you’re going to gift significant amounts that aren’t going to be spent immediately, gift into a trust for your beneficiary, as opposed to gifting outright.  Gifts in trust are protected from predators and creditors such as a divorcing spouse, malpractice suit, bankruptcy creditor, business failure creditor, and car accident or slip and fall plaintiff.

If you have questions about giving $13,000 to a child and other gifting without the wrath of the gift tax, call our office for a free, no obligation consultation.  (619-696-0778)

Legacy APC, A Trusts & Estates Law Firm is a member of the American Academy of Estate Planning Attorneys.

Many California residents have a lot of questions regarding their estate planning.  It can be confusing trying to keep track of all aspects of an estate plan.  Are you wondering about your car ownership after your death?  With proper planning, you will be able to decide who will own your care after you die!  Take a look at the information below to learn more.  If you have additional questions, speak with an estate planning attorney about your individual plan.

Some states make the transfer of a car’s ownership difficult.  However, in California it’s pretty simple.  This can be achieved with transfer-on-death registration.

All you need to do is request an additional car ownership certificate.  This additional certificate will be a beneficiary form.  You are able to name a beneficiary and after your death, the person that you have selected will own your car.�
It’s important to note that California residents will need to discuss the beneficiary designation with their spouse.  If you purchased the car during your marriage, the car is “community property” so your spouse is entitled to half of marital assets.  All you need to do is obtain written consent from your spouse before listing a beneficiary other than your spouse.

If you change your mind on your beneficiary choice, either sell the car or apply for a new certificate and name a new beneficiary.  You can’t try to change your previous choices in your will or other estate planning document.
It’s also possible to transfer a car after death with joint ownership with the right of survivorship.  You will need to designate joint tenants with right of survivorship on your car registration document.  After you die, the person who you jointly owned you car with will be given complete ownership of the car.  This individual will need to register the title in his or her own name.

If you have any questions about your car ownership after your death, consult with a qualified estate planning attorney.

Legacy APC, A Trusts & Estates Law Firm is a member of the American Academy of Estate Planning Attorneys.