Even in the best of times, people are always looking for ways to save money. During tough economic times, like we have seen over the past few years, finding ways to save money becomes even more important. Cutting corners when it comes to estate planning, however, is not one of the ways you want use to cut costs. Let’s look at just one example of the bad estate planning that results when trying to save money by “do-it-yourself” estate planning. Imagine the following scenario.
You decide that since you already know you plan to leave your home to your grown daughter it would make things easier, avoid probate, and cost less if you just sign over the deed to the home now. Of course, you will continue to live in the home until you die. What could go wrong right? Any of the following:
- Your daughter uses the home for collateral on a loan and then becomes disabled and cannot pay the loan at which point the lender forecloses on the home.
- Your daughter is at fault in a fatal car accident and her liability insurance does not cover all of the victim’s damages so the home is attached to the judgment and sold.
- Your daughter dies before you without executing a Last Will and Testament. According to the laws of intestate succession, her husband may receive the home and he may decide to sell it.
- Your daughter gets divorced and the divorce court awards the home, in whole or im part, to her husband or orders that the home be sold to pay off debts of the divorce.
- Your daughter sells the property and finds out, much to her dismay, that she has to pay significant capital gains taxes on the sale which could have been avoided had the transfer of the property been done using a more tax-advantaged method.
Don’t take risks with your estate plan. Make sure you use the services of an experienced and qualified estate planning attorney so that you do not end up in one of these situations.