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Adding a loved one to deed: Think it through first

People generally like the homes in which they live. They love their children or other relatives and want them to enjoy houses and other properties after they are gone - but without paying a lot of inheritance tax and other costs of estate administration & probate. Quite often, adding them to the property deed is the first thought that comes to mind.

At first look, it seems like a good idea in order to avoid probate. Actually, it does the opposite by complicating estate probate. According to experts, leaving real property to heirs under a will protects them from many pitfalls that likely would cost far more. If gifting interest in a home is a goal, then a better idea might be to deed the whole thing. Any partial interest would require probate anyway.

Other financial considerations affecting loved ones include the potential capital gains tax should the home be sold in the future and, according to current rules, IRS gift tax obligations if the interest exceeds $14,000. There are liabilities that could affect title to the property. For example, if a money judgment is entered against a part-owner, it could attach to the property. An aggressive creditor could force a home sale using the interest percentage of the proceeds to satisfy the judgment.

Older people may face risks related to eligibility to refinance, reverse mortgage options and Medicare eligibility. Not to be discounted is the fact that families have disagreements that could affect everyone's interests.

Options in Nevada, such as transfer on death deeds and revocable living trusts, can be better alternatives. A deed is recorded, but the property does not transfer to a loved one while the homeowner is still alive. With the trust option, property is owned by the trust as a separate legal entity. A good aspect of both options is they can be revoked if minds change.

Will planning and estate administration are important no matter what property values are. Examining wealth protection from all angles will allow for a clear understanding of the choices available to arrive at workable solutions.

Source: Washingtonpost.com, "Before adding a loved one to a house deed, think hard first" Harvey S. Jacobs, Nov. 27, 2013

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