Love Your Children But Keep Them Off Your Deeds

As our population continues to age and baby boomers become senior citizens, estate planning has become increasingly popular. One of the biggest issues and question that needs to be addressed in estate planning is, "How do we dispose of the family home and/or family cottage?" Often times the parent's real estate holdings make up the most valuable assets they own.

Clients hesitate to incur the expense of preparing a trust or comprehensive estate plan and look for a way to simplify this issue. This invariably leads to a discussion of placing the names of their child or children on their deeds as joint owners. This way the property passes by operation of law to their children upon their death. Not only is this a simple procedure but it is inexpensive compared to a comprehensive trust but, as the saying goes, "you get what you pay for".  Set forth below is a real situation where the client has learned that price is not everything.

FACTS:

A client recently contacted our firm about changing her estate plan. The client informed us that she has three adult children and approximately six years ago she had an attorney add her daughter's name to her deed as a "joint tenant with rights of survivorship." At the time her intent was to leave her home, worth about $500,000.00 to her daughter only. Now the client told me she had a change of heart and wanted all three of her children to share equally in the value of the house.

The client then directed us to prepare a deed for her daughter to execute transferring the property back to the client so that she could then create a trust and place the home in trust for equal distribution. The deed was then sent to her daughter for execution. Initially the daughter agreed to sign the deed but then had second thoughts and has now refused to sign the deed. The daughter apparently has learned that in this form of ownership whoever is the last survivor between the mom and daughter owns the house. In other words, the daughter has nothing to lose and everything to gain ($500,000.00).

Of course the client is completely devastated and heartbroken and cannot believe that "her daughter would do this to her" and that by putting her daughter's name on the deed she is now at the mercy of her daughter. Now mother and daughter and the other siblings are not speaking and an irreparable rift has been caused in the family. Unless the daughter has a change of heart (which is not likely), she will inherit everything from her mother to the exclusion of the other siblings.

CAUTION:

When meeting with clients who desire to put their children on deeds, we go to great lengths to discuss the situation and dissuade this action. Despite our advice, most often the client will say something like: our kids all get along; they have all agreed to share equally; we can trust our children; we have a very close knit family, etc. What is not taken into consideration is the fact that things change, children get married and have spouses and the dynamics of relationships change over time. Regardless, people usually ignore these warnings and proceed just as the client did in the above fact pattern. As we tell clients, nothing good will come out of this shortcut to estate planning.