There’s little doubt that working with an estate planning attorney is a great approach to protecting your assets and your beneficiaries from excessive taxation. Residents of Orange County rely on these professionals to help them discover what strategies they can use to legally avoid paying more taxes than are necessary.
One of those strategies that many estate planning attorneys in Orange County will suggest is to transfer property while you’re still living. This involves creating a deed of sale that passes the property on to an adult child or other individual. In some situations there may be tax benefits for doing so or it may make sense considering the family dynamics involved. And typically in this type of situation, the parent is typically allowed to live in the home until death.
The reasoning behind this type of decision is pretty sound. After all, you likely know to whom you will pass your property, so why not do it now instead of waiting until you die and forcing the estate or the beneficiary to pay more in taxes?
If you speak with a reputable estate planning or tax planning attorney in Orange County, however, he or she will be able to offer a few reasons that you need to fully think through this idea before making a firm decision.
Unfortunately, there are times when deeding over property can work against you. The biggest concern, of course, is that some reason would arise that the person who now owns the property would force you to move out. For elderly people who planned to spend their retirement in their own home, this can become more than an inconvenience. With the home paid off and only a retirement income to live on, it’s unlikely that a lot of folks would be able to go out at that point and purchase a new home.
There are other ways in which the home can be jeopardized, too. For example, the person to whom it was deeded could find himself in debt with creditors insisting the house be sold to pay it off. He or she may also decide to take out a loan using the home as collateral (which would be completely legal) and then default and cause the home to be repossessed and the parents to be removed.
Because of the intense emotions that go along with issues surrounding estate planning (death, litigation, family tensions), Orange County estate planning attorneys sometimes see the uglier side of people. Once a home has been deeded over, the parent may no longer have any say in what happens to it. Should the relationship between them and their child change for the worse, the parents could be evicted. Remember that this isn’t just about the parent/child relationship, but also about your relationship with your child’s spouse.
Along those same lines, consider how inheritance works. If you deed a home to your child and that child is unexpectedly killed, your property does not revert to you. Instead, it passes to the spouse and any children. Those people may now have need for the home without a second parent to help pay for expenses. And that’s not even taking a look at situations where there’s just bad feelings between the survivor and his or her in-laws.
None of this is to say that deeding over your property is necessarily a bad idea. After all, there’s a reason that estate planning attorneys in Orange County recommend it on a regular basis. It is, however, important to understand what the risks are and to work with your lawyer to find ways to minimize them through legal means.