People sometimes deed their property to their children while still alive in order to make sure the home goes to the kids after the parent has passed. However, this shortcut often comes with significant unanticipated risks/costs.
When a homeowner dies, the home usually must go through a process called “probate” to be passed on to the person entitled to receive it. Signing over the deed while still alive is supposed to avoid probate.
When a parent deeds the home to a child in this way, the assumption is that the parent will pass first. Of course, this is not always true. So, what happens if the child dies first?
First, the parent may not get the home back. When the home was deeded to the child, the parent gave up the ability to control what would happen next to the home. If the child has a Will, the assets will go to the people listed in the Will. If the child does not have a Will, the law will decide who gets the home. A parent is not first, or perhaps even second, on that list.
Even if the parent is somehow lucky enough to receive the home back, this will not happen automatically. The home will need to be passed on through – you guessed it – the probate process. This was the very process the parent was trying to avoid in the first place.
It is so much safer to keep ownership of your assets in your own name. There are simply too many things that can go wrong when you give up control over your significant assets. Next column, I will give another example.
On the other hand, it is not difficult or expensive to have an orderly plan to pass your assets to those you wish to receive them, but not until the right time. Come to our next presentation and learn the simple steps to protect your estate.