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Home / General / Don’t Put Your Kid’s Name on an Asset and Call It Estate Planning

Don’t Put Your Kid’s Name on an Asset and Call It Estate Planning

September 10, 2013 by Marianne Flood, Estate Planning Attorney

My aunt from upstate was a real know it all.

She had opinions on everything (like most of us do), but she always insisted that her opinions were correct (like most of us dont).

She had one son (lets call him Jackie).

After her husband died, my aunt came up with the brilliant idea that she would do her estate planning by putting all her earthly goods in Jackies name. Her house? She deeded it to Jackie with the understanding that Jackie would let her live there for the rest of her life. Her bank accounts? Again, she transferred them all to Jackie, with the understanding that when she needed money, all she would have to do would be to ask Jackie.

To understand why my know it all aunt could possibly believe that this estate planning strategy would work; you would have had to know Jackie. He was an only child, as loyal and devoted to his Mom as the day was long. He never married. He had no girlfriend. He was what we used to call a real Mamas Boy.

And he was unfailingly obedient. Whatever his mother asked him to doJackie would do.

Except that one day well into his adulthood, Jackie played a terrible, nasty trick on his mother which totally exploded what my aunt thought was an ironclad, foolproof estate plan.

Jackie died first.

You see, my know it all aunt thought she would die before her son; or she believed it to be true; or she wanted it to be true; or she assumed that it would be true. And, most of us believe with a fair degree of accuracy, that that is what is going to happen. Old generations give way to new, they say. Children bury their parents, not the other way around, they also say. Jackie didnt get that memo.

So my know it all aunt ended up paying Pennsylvania Inheritance Tax

ON ALL HER OWN STUFF!!

You see, my aunt was Jackies sole heir, and she inherited back from Jackie all the stuff which she gave him, including her house and all her bank accounts.

Some estate planning, eh?

Theres a moral to this story: When you give an asset to a son or daughter with the understanding that youll continue to use it, or even if you make your son or daughter a joint owner of the asset with you, youre subjecting that asset to the problems and pitfalls of your childs lifestyle. You might find that person your son or daughter married (who you never liked anyway) is walking away from the marriage with half of the house you transferred to him in divorce proceedings. Or, if your kid develops tax trouble, your property may be subject to a tax lien, because now its his (or her) property. Or, if your kid gets sued and loses, a judgment would be filed against him and the house might be subjected to sheriffs sale to pay the judgment, and so on, and so on.

Or your kid may die first.

There are so many ways to structure your estate planning without transferring your assets to your kids, so that all your goals may be accomplished.

I know that many people think that theyre getting over on the Inheritance Tax people or the Nursing Home people by putting their assets in their kids names. Unless theres a good, sound, non-estate planning reason for doing so, I strongly advise against it.

Its a bad idea.

Just ask my know it all aunt.

 

 

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Marianne Flood, Estate Planning Attorney
Marianne Flood, Estate Planning Attorney
As the founder and managing partner of the Southampton, Pennsylvania law firm of Flood & Masiuk, LLC, Marianne Flood oversees a practice devoted to providing clients with personalized service and counsel in all aspects of estate planning.
Marianne Flood, Estate Planning Attorney
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About Marianne Flood, Estate Planning Attorney

As the founder and managing partner of the Southampton, Pennsylvania law firm of Flood & Masiuk, LLC, Marianne Flood oversees a practice devoted to providing clients with personalized service and counsel in all aspects of estate planning.

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