October 5, 2010

Don’t Sign That Deed Until You Read This

curtBy Curt Ford
Nash Nash Bean & Ford

People who are trying to arrange their assets so that they’ll avoid probate or so that they’ll qualify for Medicaid
sometimes decide to deed their property to their children. At first blush, this seems like the perfect solution. It’s quick, it’s easy, and it’s inexpensive. Plus, it often accomplishes your short-term goals. The problem is that deeding your property to another person can trigger many legal effects and consequences that you’re not even aware of – until it’s too late.

Consider these potential pitfalls:

1. Lack of control over your property. Once you deed your property to someone else, it’s theirs to do with as they please. While your children may cooperate with you and transfer title back to you should you change your mind, you can’t count on this happening. What do you do in this situation? Often, a family has to resort to litigation to solve the problem. This means wasted time and money, and damaged family relationships.

2. Exposure of your property to creditors. When another person has a right to your property, his or her creditors may also have a right to the property. This is true even if you just add a child as a joint tenant, instead of deeding your property outright to the child. Consider what happened to Ellen Adler. In an attempt to avoid probate, Ellen added her son John to the deed to her home, as a joint tenant with rights of survivorship. Her son had always had exemplary credit and was excellent at managing his money, so she thought she had nothing to worry about.

Unfortunately, John was in a terrible car accident in which the other driver was severely injured. The other driver sued John and won a large judgment against him. Now, the other driver has the right to claim John’s portion of Ellen’s house in payment of the judgment.

3. Exposure of your property to divorcing spouses. Even if creditors never become a concern, once you transfer property to your child, his or her spouse may have a claim to the property. This becomes a big problem in the event of divorce. Your property could become a casualty in your child’s divorce proceedings.

As simple as it seems to just give away your property, this step often turns out to be a big mistake that’s difficult and expensive to undo – if it can be undone at all.

So, what steps should you take? It depends on your goals and your specific situation. For example, a Revocable Living Trust is an effective and simple way to avoid probate. A trust can be established to let you effectively retain control over your assets while you’re still alive, and have them distributed to your beneficiaries – outside of probate – when you pass away.

Proper Medicaid planning may be a bit trickier – the rules can be complicated, and you may need to “give away” certain assets to qualify. But, the way you give those assets away makes a huge difference. Again, a trust might be the most effective way for you to qualify for Medicaid.

Whatever your circumstances, a consultation with a qualified estate planning attorney will help you choose the right course of action and understand all the potential consequences ahead of time.

Nash Nash Bean & Ford are members of the American Academy of Estate Planning Attorneys and the National Academy of Elder Law Attorneys. To receive a copy of our most recent newsletter “Your Estate Matters” or for a free consultation on Estate or Long Term Care Planning, call 309-944-2188, 309-762-9368 or 1-800-644-5345. You may also contact our firm by email at info@nashbeanford.com or visit our web site at http://www.nashbeanford.com.

The firm devotes its practice primarily in the areas of estate, business and tax planning and related areas of the law, as well as elder law and trust administration and probate. We offer guidance and advice to our clients in every area of estate

This column is designed for general information purposes only, and is not intended, nor should be construed or relied upon, as legal advice. Please consult your attorney if specific legal information is desired.

Filed Under: Finance

Tags: , , , , , , , , , , , , , , , , , , ,

Trackback URL: https://www.50pluslife.com/2010/10/05/don%e2%80%99t-sign-that-deed-until-you-read-this/trackback/