This Common Mistake Can Cost You Your Home and Money – Fayetteville Estate Planning
Fayetteville Estate Planning Attorney Near Me
The common estate planning mistake is adding your children as co-owners of accounts and real estate. I’ll tell you what to do instead in just a minute. First I want to tell you the consequences of adding your children to accounts and deeds.
When you make your children a co-owner you are giving them full access to the money in your account. If they decide to withdraw it, then it is theirs to withdraw. You can’t sue to get the money back because you gave them full access. You can’t press charges because you gave them full access.
If they get sued, get in credit problems, run into financial issues, have IRS issues, and more – your money is exposed to their mistakes and problems. Their creditors, IRS, and more can reach through them into your account and take your money.
The same goes for your house and any other real estate. When you put them on the deed, you are exposing your real estate to their financial problems. It creates all the same problems. Also, if you want to sell the house you either need to have them deed the house back or give them their part of the money.
With the house and certain accounts, you can create tax issues. You probably won’t end up paying gift taxes, but your children may end up facing a steep capital gains tax bill.
And the problems improper gifting can cause if you ever need help paying for a nursing home. Medicaid has pretty stringent rules around whose money it is and if it was a gift to the other person. When you put your children on the deed Medicaid considers it to be a gift of part of the property. If it was done within the past 5 years, it can lead to financial issues.
The solution is to create powers of attorney to give who you want the power to write checks, bank, and manage real estate without making them a co-owner of an account. Since they don’t own the account or real estate, their problems don’t become your problems.
But it shouldn’t be an old run of the mill power of attorney. It needs to contain specific language for Medicaid planning and more.