Parents often consider transferring assets to their children during their life. They may believe that the transfer will avoid probate and make it easier for the children upon the parent’s death. Lifetime transfers are sometimes used as an estate planning tool in limited circumstances and may avoid probate; but, for most of the population these transfers could trigger unintended consequences.
There are several problems associated with an outright gift of an asset to a child or children. What if you regret your decision or realize later that you need the asset for your daily needs? Your child may choose not to give it back, or your child may not be able to give it back. For example, your child could be involved in court proceedings with creditors or in the midst of a divorce, and now your assets look like they are your child’s assets.
Let’s look at some risks involved in transferring your home to your child by gift during your life. First, you may lose your ability to access the equity of your home if that becomes necessary for your living expenses if your child does not consent. You may also be disqualified from receiving Medicaid benefits if you need full time nursing home care. What if the child you give your home to predeceases you? Will your son-in-law or daughter-in-law take care of you?
There are income, estate and gift tax consequences to transferring assets during your life. Before transferring assets during life or at death you should consult with an attorney experienced in income, estate and gift tax planning.
JensenBayles, LLP provides a broad spectrum of legal services. For over 16 years Thomas J. Bayles has provided advice in the areas of trusts, wills, probate and tax planning in the St. George market. Please visit our website www.jensenbayles.com or call 435-674-9718 and ask for Thomas J. Bayles or Phillip G. Gubler.