Many people believe that it would be easier for their loved ones if they transferred ownership of their home before they need to. Bypassing probate in Cobb County, they believe, will be easiest for everyone. That could be true. However, there are several risks to consider that might harm you or your heirs.
Hazard #1 – You could create tax problems
If you transfer your principle residence you could be disqualified from part or all of the capital gains tax exclusion causing an unnecessary tax liability. This means that if you decide to sell after sharing ownership of your home with your children, they would have to pay capital gains taxes on the increased value of the home. This is really bad news if you’ve lived in your home for many years and the value of the property has significantly increased.
Hazard #2 – House value counts against you if you need Medicaid
If you transfer your house within 5 years of needing Medicaid assistance for a nursing home, you will probably be ineligible. Medicaid has a five year “look back” period where any monetary gifts or property transfers are considered which may take you above the income requirements.
Hazard #3 – Your loved one could get divorced
If you transfer an ownership interest of your home to your child, and then the child gets divorced, your ex-son/daughter-in-law might be entitled to part of the value.
Hazard #4 – Your child could file for bankruptcy
When you share ownership of a home with your child, you also share exposure to one another’s financial problems. If you are moving to an assisted living home and plan to use the equity in your home to pay the rent, you may have a bad surprise if the bankruptcy court demands some or all of the proceeds of the sale to pay your child’s creditors.
Hazard #5 – Something happens to your child
If something unexpected happens to your child and they become incapacitated or predecease you, you could run into real trouble. If, for example, your child becomes disabled and needs Medicaid coverage, he could be ineligible due to his share of the home.
Hazard #6 – Your child is a problem
After you transfer ownership of your home, you must all agree if you decide later to sell the home or even do renovations. If your child doesn’t agree with you, they can stop you. I know that it is hard to imagine your dear son or daughter in this light, but it happens more often than you can imagine.
The bottom line here is that you need to be very careful when considering transferring or sharing ownership of your home with your children. There are several other options but it is important that you work with a qualified estate planning and trust attorney in Marietta GA who knows how to utilize better (and safer) legal strategies to accomplish your goals.
Hopefully you go to the doctor for a yearly physical. Getting a good checkup gives you a feeling of contentment knowing you are doing all you can do to keep yourself healthy. Have you considered a yearly estate planning checkup? Going through your documents and reassessing your decisions will give you peace of mind knowing you’ve done all you can do to keep your family secure if something happens to you.
An annual estate plan review doesn’t mean you have to read the legal documents front-to-back. Just go through the most important elements to make sure you would make the same decisions today. Here’s an estate plan review checklist that will walk you through the process:
Have you had any life changes since you last updated your estate plan? Have you gotten married? Have you had a child? Have you recently moved from another state? All of these life changes may impact your estate planning which require your will or trust to be updated.
- Consider your executor and/or trustee designations
Is the person you selected to be executor the person you would select today? If circumstances have changed and you now question whether this person is responsible and trustworthy you should consider updating your will or trust. Also, if you named one person, you may want to choose co-trustees who would work together. You may also want to set up additional levels in case your first choice of trustee is unable to execute.
Is there a particular family heirloom or other item or property that you want to go to a specific person? You might now want to update your will or trust to make sure that happens.
- Financial power of attorney
Your financial power of attorney will act for you in a wide array of financial and business matters. It is essential that you think about the person you named and make sure that you still consider them the best choice for you.
Review your health care power of attorney to make sure that the person (or people) you named is someone you still trust to make major medical decisions for you. If your health care power of attorney lives in another city or state, you might want to consider naming someone local in case of an emergency.
- Life insurance and retirement funds
While technically not a part of your estate plan, be sure to assess the choices you made as beneficiaries of your life insurance and retirement plans. Many people forget to update these after a divorce and you certainly don’t want your ex-spouse to inherit those funds.
This checklist should take you quickly through some of the most important parts of your estate plan here in Cobb County, Georgia. If you need to update them, don’t delay. Procrastination is not your friend when it comes to estate planning!
If we can help, please call us at 770-425-6060 or email me at firstname.lastname@example.org, tell us you saw the “Checklist” article. As a reader of this blog post, you are entitled to a Georgia Family Treasures Planning Session, valued at $600 or more, at NO CHARGE. Appointments are filling fast for May and June, so don’t miss out! Call today!
As an East Cobb estate planning lawyer, I know the REAL reason why Prince died without a Will or Trust… and why this is likely the same reason that many folks in our area are struggling to create their estate plans as well.
Following the shocking death of Prince, folks across the country were equally shocked to learn that the musical genius died without a Will or Trust in place to deal with the distribution of his fortune and valuable music catalogue when he passed away.
Dying without a Will in his home state of Minnesota now means that Prince’s wealth will likely be distributed among his six siblings... but only after more than half likely gets distributed to his other newfound family member, Uncle Sam. Yikes!
Obviously it wasn’t a lack of money stopping Prince from creating an estate plan to protect his assets and wishes if something happened to him. He had plenty of cash and access to high-powered lawyers in his own home state and across the country.
So what was the problem?
Well, according to a new report from TMZ, Prince was afraid to work with an attorney to get his affairs in order.
He bounced from advisor to advisor and professional to professional out of fear of being taken advantage of.
He didn’t want to subject himself to misguided information.
And, he feared becoming preyed upon by professionals with ulterior motives.
Before you write Prince off as crazy paranoid, believe it or not, this is exactly what stops average families from getting their affairs in order, too.
Maybe they don’t have millions of dollars in the bank and an impressive music catalogue like Prince did, but they hold on tightly (and rightfully, so) to the money and assets they do have… much of which they’ve worked hard for decades to acquire.
It’s only natural, then, that when faced with a crisis such as a medical illness, incapacity, the blending of a family, a divorce, a lawsuit, whatever, a general fear tends to rise up in folks that the attorneys they are meeting with to help them create a plan to protect their assets and families might be taking advantage of them or simply don’t have their best interest in mind.
Perhaps they have sticker shock at the basic cost of a Will or Trust. Or, they may feel like the attorney or advisor is just preying on them during a weak moment in their life.
In any of these scenarios, what ends up happening when someone has these feelings is that they freeze from the fear and end up doing NOTHING. Just like Prince.
As an East Cobb estate planning attorney, I’m not going to say that these fears are unfounded. There are bad eggs in every bunch, including attorneys and financial advisors.
But the fallout of not protecting your family with a proper estate plan does not outweigh the risk and fear of being taken for a ride! If you want to be certain that everything you’ve worked so hard for actually goes to your loved ones, and not the government when you are gone, you’ve got to plan.
If you want to make sure your kids are raised by only the people YOU WANT if you unexpectedly pass away, you’ve got to plan.
If you desire to keep your life’s work safe from nursing homes, creditors, predators, lawsuits and divorce, YOU’VE GOT TO HAVE A PLAN.
You even need a plan to ensure your medical wishes are honored as you want. Here’s another area that Prince likely dropped the ball.
As a Jehovah’s Witness, he was opposed to any form of blood transfusion. But, did he have that legally documented? Because if he did not, and was incapacitated in the hospital for any length of time, his next-of-kin sister might have decided to go ahead with a transfusion. And it would have been perfectly legal, even though it was against everything he believed in.
I hope I’ve made it clear that you NEED to have an estate plan. Every adult does. It’s not an option.
And, the good news is that you can take proactive steps now to AVOID being taken advantage of or sold products or services that you really don’t need by an attorney or other type of financial advisor.
The key is to start your planning BEFORE a crisis strikes.
My best advice would be to start interviewing attorneys and local professionals while you are still healthy and have the mental capacity to make your wishes known. Your end-goal should be to compile a team of advisors that you know, like and trust to support you and your family during all of life’s transitions.
Don’t be afraid to compare services, compare costs (note: cheaper does NOT always mean better in this area) and even compare office procedures for each attorney. Ask tough questions like:
- How do you bill? Is it hourly or on a flat fee basis? Will I get a bill for every phone call, email or fax to the office?
- What happens if I call two years later with questions about my estate plan? How will you accommodate me?
- How do you ensure that my plan continues to work as my life and the law changes through the years (if you don’t keep your documents updated, they won’t work!)
- What happens if you close your office, or die? What happens to my file?
- Will you coordinate the planning efforts we are embarking on with my other advisors so everyone is on the same page?
- How do you handle updates to my plan in the future?
- What happens if my goals or circumstances in my life change? What if I get sick or move into a nursing home? Are there trigger provisions that will allow us to deal with a crisis in my plan?
- How will you support my family if/ when I pass away?
If you take the time to find a professional that can answer these questions to your satisfaction, that has as great reputation and is someone that you seem to “jive with”before there is a crisis in your life, you will feel much more confident and secure to lean on that professional during trying times that may arise in the future.
Sadly, Prince did not follow through in this area, but you can.
Begin to build your team of advisors, right now… at this stage of your life. It doesn’t matter how much money you have, whether you are young or old, if you have kids or not. Start to build your “A” team. Make it your goal to spare your family from the court costs, taxes, public scrutiny and fighting they would otherwise face if something happened to you.
Take your time to do “meet and greets” and interviews with area advisors. Go to every free workshop that is offered in your area to find that person that you connect with.
And, once you feel comfortable with your team, make the plan. Legally protect your assets, your family, and make your wishes known. Don’t ever let fear stop you from doing the right thing by your loved ones when you can start NOW to take concrete steps that mitigate any risk or loss of control.
You are worth it, and so is your family. Let this be the real legacy (beyond the music) that Prince leaves behind to you and your loved ones today. Call us, your friendly neighborhood East Cobb estate planning attorneys, at 770-425-6060 and let us help you create your plan.