Myth 6: “I should just put my child’s name on the deed to my home and thereby avoid probate.”

You can do this, but it most likely is NOT the right decision for you and your family because it will likely lead to undesired and unintended results.

As mentioned above, the practice of putting a son or daughter or another family member or friend on a real estate deed, bank account, or other asset is quite common and not a new idea. This practice has been around for years, and sometimes it’s worked out okay, at least in the short term. But times have changed, tax laws have been revised, and what once was commonplace and appeared to be a permitted practice is not a good idea these days. Why not? Good question—glad you asked. While you may in fact avoid probate through this approach, the results of this type of “planning” may end up being far more expensive and far more problematic than probate. For example, if I were to put my son on the deed to my home, what would be the outcome? Among other things:

  • My son’s creditors would become my creditors. If he was in an auto accident and was sued, my home could be an “available asset” if the court judgment went against him. In the same way, if he got divorced, my home could be part of such a divorce and the related squabbling over assets.
  • My son would legally own part of my home.
  • I may have created unintended tax issues (including gift tax and capital gains tax).
  • My son might not “do the right thing” when the times comes, and this is important to note because very often parents who put their sons or daughters on deeds or bank accounts fully believe that when the time comes for him or her to share the asset, he or she will “do the right thing.”

In short, I would have given up control over my home and created a long list of potential problems. The same realities would be present if I had put my son on my bank account.

Sometimes, parents think they can simply have their son or daughter agree in advance that the parent will take this course of action to avoid hiring an attorney, and the son or daughter understands and agrees he or she does not really “own” part of the house or bank account. However, if his or her name is on the deed, he or she owns part of the house! The same thing is true if the son or daughter is listed as co-owner of a bank account. That is the legal reality whether the parent and son or daughter have a “side arrangement.” Therefore, notwithstanding any understanding between a parent and a son or daughter, all the unintended and potentially problematic results noted in the bullets above remain.

Here’s another example from my law practice relating to this type of “do it yourself” estate planning. I was contacted regarding the probate of someone who had died quite unexpectedly at age fifty-two. He was single and seemed to have been in very good health. Since he had an elderly, widowed mother and his siblings were married with children, all involved thought that the most prudent thing would be to engage in “self-help” planning for the elderly mother by putting her home in the name of the son and doing the same thing with the mother’s bank account. Not long after these changes were made, the son died.

Because the son had done no estate planning himself, the family was left to pick up the pieces of his affairs, including hiring law firms in two states to undertake two probate proceedings. The home of the elderly mother (ownership of which had been changed into the name of the deceased son prior to his passing) was included in one of these probates—even though the mother was still living in the home at the time. The total legal fees related to this probate exceeded $30,000!

There are several items to note and learn from this unfortunate story.

  • If you own land or other assets in more than one state and you die without having established and maintained a valid trust to own and manage such assets, upon your disability or death, your family may need to undertake separate probate proceedings in multiple states. Such scenarios make it all the more important to seek competent legal estate planning counsel.

The good news is that it is possible to avoid probate altogether, including in situations in which there are assets in more than one state.

  • None of us knows when our last day will be, so even if we think we are “too young” to think about death and planning our estate, the truth is that we’re never too young or too old to consider these things.
  • Do-it-yourself estate planning is almost always a bad idea and often leads to bigger and more expensive messes than simply retaining a qualified attorney to do it right at first. Also, as noted earlier, it’s not always possible to fix problems created by the do-it-yourselfers, especially when someone has died before proper planning was undertaken.
  • Probate can become an expensive, public, and time-consuming process. On the other hand, this is not by any means always the case. In fact, the reality is that a great many probate proceedings go smoothly and don’t end up costing tens of thousands of dollars. But probate can become a can of worms, and there’s no way of knowing beforehand whether your probate will go smoothly (as many do) or devolve into a big mess.

This desire to protect against the unknown is what motivates many people to undertake planning that guarantees probate will not be something their families will have to deal with. These people desire to protect against the possibility of a long, expensive, and very public court proceeding, and they know they can avoid this risk. Probate is totally preventable (like tooth decay), but such prevention requires proper planning and periodic maintenance (again similar to healthy teeth).

This would also give my son all the rights and responsibilities associated with home ownership, including tax liabilities as well as the right to sell his portion of my home whenever he chose.

I have family members who are dentists, so I have some sense of the realities of tooth decay.