‘Till Death Do Us Part, or Divorce: The Story of the Browns

September 22, 2020
Categories
Living Trusts

One of the top concerns when going through the estate planning process for older generations is to ensure their heirs avoid probate. Probate can be extremely expensive and ties up assets that heirs can’t access. Learn how a nasty divorce can turn a probate process into a nightmare.

If you are an older American going through the estate planning process, it is likely that one of your top concerns is helping your heirs avoid probate. The probate process can be extremely expensive, requiring your heirs to pay appraiser's fees and other expenses. Sometimes probate can take years, especially if you have a complicated estate or if one of your heirs attempts to contest your will. Even worse, if probate ties up your assets, it means that your heirs cannot access them. It is possible that your family members in need will not be able to access the assets you left behind for them if your estate ends up stuck in probate.

So, there are many reasons to try and avoid probate. However, not all approaches are equal, and many well-meaning estate planners end up in a lot of trouble trying to ensure that their children avoid probate. For instance, some older parents decide to add their adult children on the deed of their home for this purpose. However, as we outlined earlier with the story of Claudia Grace, this is almost never a good idea. Claudia Grace struggled with the IRS due to putting her adult child's name on the deed to her home.

Today, we will discuss the Browns, who put their son Charles on the deed to their home in hopes that this would help their home avoid probate upon death. However, it was Charles' ill-fated wedding that almost caused the Browns to lose their home.

How does this strategy help avoid probate? 

The reason why many older adults decide to put their children on the deed is because of joint tenancy. With joint tenancy, all persons on the deed hold equal stock in the property. If one of the owners dies, then the other persons on the deed immediately assume ownership of the property. The property does not enter probate.

The problem with this strategy is that the moment you put your adult child on the deed, your child becomes an equal owner of that property. There are no rights associated with owning the property “first.”

This means that any economic misadventures that the children get into may have implications for the property.

What happened to the Browns? 

When the Browns originally put their son Charles on the deed to their home, Charles was single and not living on the property or making any claim to it. However, a couple of years later, Charles got married. Since there was no prenuptial agreement between Charles and his wife withholding the Browns' home from marital property, the moment Charles got married his wife received an automatic legal claim to the Browns' property.

Charles' marriage ended in divorce three years later. Since the law considered the Browns' home part of marital property, the Browns had to deal with Charles' ex-wife's claim to the property. They ended up refinancing the property at huge loss in order to pay off Charles' ex-wife and keep the house.

The risks with taking shortcuts 

Overall, it likely would have saved money, time and stress for the Browns' property to go through probate. Instead, the Browns ended up with a nasty, expensive nightmare to manage. A better option would have been for the Browns to create a revocable living trust. Through the trust, the Browns could have relinquished ownership of their property to the trust, and then chosen Charles as the beneficiary of the trust upon death. Contact us today at AmeriEstate for comprehensive estate planning strategies.