Risks of Estate Planning by Deed

“Are there any issues with including my adult kid on a deed as a joint renter holder so the child gets the property at my death?”
“Are there any issues with offering a deed to a child with directions not to record the deed till death?”
“What if I simply deed my real estate to my kids while I am alive?”

chilkd-holding-deed-of-parentsThese are all concerns I hear with significant frequency. The motivation seems a desire to avoid probate, however probate may be the least of one’s issues if one uses any of the above situations.


The kid might not bring out your dreams on death thus disinheriting your other kids. Second, if your kid holds title to your genuine estate with you as joint tenants then the child’s signature is needed to offer the real estate or get a home mortgage. Third, if your kid has lenders you may be required to safeguard your real estate versus attacks by your kid’s lenders.

A straight-out transfer of property to another for less than reasonable market worth sets off gift tax and the requirement to submit a gift income tax return with the IRS on any amount over $14,000.00 (2016) annually. You may have gift tax credit that will save you from paying tax out of pocket, however you need to file the gift tax return. A transfer to a kid as joint occupants may be considered as a present of one-half the worth of the genuine estate which might also undergo the present tax and its filing requirements.

An extra tax issue is the loss of an earnings tax advantage if you move investment genuine estate to your kid during your life. Then your kid’s tax basis will likewise be $100,000.00, if your tax basis in the real estate you move to a child during your life is $100,000.00. Then offers the genuine estate for $150,000.00 there will be a capital gain tax on the $50,000.00 distinction in between the tax basis and the sales price, if your child. If your kid gets the financial investment property as a result of your death by will or trust then Section 1014 of the Internal Profits Code normally provides that your child can reset the tax basis to the reasonable market price of the realty on the date of your death. Thus, if the fair market value is $150,000.00 on your date of death and the kid offers the realty the day after your death your child will not be needed to pay capital gain tax on the realty.

A deed signed by a parent with the comprehending the child is to tape-record the deed on the death of the moms and dad is subject to all of the foregoing problems and might likewise cannot transfer legitimate title. For a valid transfer to happen the deed needs to be delivered or the deed must meet the requirements of a valid will. This approach is stuffed with problems and need to be prevented.

A good solution to these problems is to make use of a revocable living trust prepared by a capable estate planning attorney.