What’s that you say? You want to leave your home to a loved one? Great! That’s a wonderful way to leave a legacy. Just be careful how you leave this property to your loved one. Simply retitling the property could have harsh consequences, such as:
Gift Tax and Capital Gains: We all know your intentions are good. Unfortunately, the law doesn’t consider your intent when transferring property to another (i.e. retitling as joint tenants with right of survivorship). Whether or not you intended this transfer to be a gift is irrelevant; if you did not expect anything in return of equal value the IRS will consider this transfer to be a gift and gift taxes will apply. Additionally, when you pass away the individual will be subject to paying capital gains if they choose to sell the property. Capital gains are profits made from the sale of property where the sale price exceeds the purchase price and can be very high.
Creditors: Like most responsible individuals you have paid your bills on time, have good credit and aren’t worried about the possibility of creditor claims. Yet, are you aware that once you add another individual to the title of your property that the property is now subject to that individual’s creditors too? This means that no matter how diligent you are with paying your debts, the property will never be totally secure since it remains open to the other individual’s possible creditors.
Control: Adding someone to title means you now share rights of ownership to the property. This means you can’t continue to treat the property as your own. If you wish to sell it, for instance, you must have their full consent to do so. By adding this additional name to title you have given up control as the sole owner of that property. While you may be ok with this decision today, can you guarantee that you will be on board with this decision in five or ten years? I sure hope you can guarantee it since you will not be able to change your mind and remove them from title without their consent. What’s done is done.
There is another way to accomplish your goals and avoid these harsh consequences; a Revocable Living Trust. The trust will allow you to remain in complete control of the property while you are alive, prevent possible gift taxes and capital gains. Upon your death, the property will then be transferred to named beneficiary, therefore accomplishing your primary goal! Call (954) 94-2855 for your free consultation and our attorneys will explain in greater detail the benefits of creating a Living Revocable Trust.
For more information on Estate Planning visit our website at www.wfplaw.com.
It’s A Wild World. Are You Protected? SM