There are many reasons to want to avoid probate: it becomes a matter of public record, it can cost your heirs a lot of money, and it can sometimes take years. For these reasons, many people take it upon themselves to try and avoid probate at all costs.
However, taking this stratagem too far can cause many problems and end up being even more costly and time-consuming than probate itself. For instance, many older Americans want to add their children on to the deed of their home in hopes of avoiding probate. The concept of joint tenancy in particular has right of survivorship, meaning that the property stays out of probate if one of the owners dies: the surviving owner merely assumes total ownership.
While this sounds like a good deal, adding somebody else to the deed of your property, even if it is a loved one, almost never ends well. Take the case of Claudia Grace, who tried to avoid probate by adding her son, Michael, on the deed to her house.
No good “deed” goes unpunished
Like many older Americans, Claudia wanted to help her beloved son avoid probate after her death, so she added Michael’s name to the deed. Claudia did this prior to the Great Recession of 2008. At the time, Michael owned a thriving airplane mechanic business and, by all accounts, was responsible with money and doing well.
When the great recession hit, Michael’s business went under as a casualty of the times. Eventually, the IRS went after Michael due to unpaid taxes. Since Michael’s name was on the deed to Claudia's house, the IRS started to force the sale of her property so that Michael could use the funds to pay off his debts. Even though Michael was not living on the property and Claudia owned it “first,” legally the property was as much Michael’s as it was Claudia's.
Claudia would have gotten a share of whatever profit selling the home generated, but she would have lost the home. Since she was not in a position to move at this point and had been planning on living in the property until her death, she had to act fast in order to save the property.
Claudia ended up paying thousands in legal fees to lawyers. Eventually she also had to pay Michael’s tax obligations. In total, the entire process cost Claudia well over $100,000 dollars, which seriously hurt her retirement fund.
Protect your loved ones’ inheritance the right way
Take Claudia Grace’s story as a cautionary tale. What seemed originally like a good way to avoid probate ended up as a legal nightmare that cost thousands of dollars to fix. It is highly likely that putting the house through probate would have been less stressful.
There are other ways to ensure that your home stays out of probate and in the possession of your loved ones after you are gone. One way to do this is to create a revocable living trust. With this approach, the trust is the owner of the property, not you or your loved one. You can avoid probate this way and also protect yourself and your property. An AmeriEstate advisor can help you make smart estate planning decisions.
Contact AmeriEstate today to get started.