Taxation & Estate Planning

I often have clients (or client's children) who ask me - "can't I just give my property to my child?" Or who say "My mom wants us to inherit her house, isn't the easiest way to just have her sign a life estate deed?" Sometimes it's "I'm allowed to give away $10,000.00 per year, right?" or  "I put my bank account in my son's name since he is going to be paying my bills for me from now on, that's ok, right?"  In many cases, it's not ok.

One of the things you need to be aware of when you are transferring your property is that there may be ramifications beyond just making a nice gift or helping out a child:

• If you give property to a child, it could be at risk if that child is sued or files for bankruptcy.



• If you put money in your child's name that they plan to hold on to for your future use, this could count against them if they need to apply for financial aid for their children or for themselves. 



• If you pass the remainder interest in your home to a child, you will not be entitled to the full proceeds from the sale if the home is sold during your lifetime.  You will only be entitled to the share of the proceeds that are allocated to the life estate, and your children will be entitled to the proceeds that are based on the value of the remainder interest.  This could significantly reduce the amount of money you thought you would receive upon the sale of your home. 



• If you pass the remainder interest in your home to a child, and that child later needs to file bankruptcy they could be forced to sell their share in the family home to satisfy their debts. 



• If you give property to your child, either cash or real estate, that property could be at risk if your child goes through a divorce.



• If you give your property to a child, you may end up needing it for your care and be unable to access it when you need it.



• If you give real estate to a child, there may be negative tax consequences for them when the property is sold.



• If you give the remainder interest in your real estate to more than one child, and they later can't agree on what to do with the property, one of them may take legal action against the other to force the sale of the home. 
  
  
  
  
• If you give money or property away and later need to apply for public benefits such as MassHealth, you may be ineligible due to your gifting. 

What seems like a relatively simple transaction can be riddled with "traps for the unwary" for both the giver and the recipient.  There are many safe and appropriate ways to make transfers of property to your children while insuring that you, your children and your property are protected.  It is vital that both parties seek legal advice so you can go into the transaction being fully aware of the consequences of the gifts, and the best way to structure the transaction.