Estate Planning is really about comfort. What estate planning is all about is discovering the right ...

1. Use Joint Tenancy To Pass Property To Your Children And
Avoid Probate
Estate Planning is really about comfort. What estate planning is all about is discovering the right
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Avoiding Probate is a major consideration that people must consider when discussing the passing of
assets from one generation to the next, particularly due to tax consequences and Liability issues.
Periodically, grown children of seniors will suggest that the parent add the children's names to the
title on the parent's home. The idea is that the children would become joint tenants with the parent
so that the home won't have to go through probate when the parent passes away.
Joint tenancy is a form of ownership of property that permits the surviving joint owner to receive the
share of a deceased joint owner automatically.
For example, if a parent were to enter into a joint tenancy with her son, he would become the full
owner of the property at the parent's death. Because the property passes automatically, the son
would avoid having to take the home through probate, and would most likely save a great deal of
money in probate fees. All the son would need to do is have an Estate Planning Lawyers Affidavit of
Death of Joint Tenant drafted and recorded with the County Recorder, and the title would be held
solely in his name. However, it is good practice to avoid this kind of an arrangement, for several
important reasons:
Tax Consequences: When two people buy property together as joint tenants, the amount of money
they invest in the property is called their "basis" in the property. A property's basis is exempt from
capital gains taxes at the time of sale. If somoene bought a home many years ago, that person's basis
in the property might be quite low. In many areas, despite the recent downturn in the economy, a
property that was purchased many years ago for $150,000 may easily be worth three times that
today.
When a person receives property from a deceased person, the recipient usually gets to take what's
called a "step-up" in basis. That means that the property's basis is raised to the fair market value at
the date of death of the deceased person. If the recipient were to sell the property immediately upon
receiving it, that person would not have to pay any capital gains taxes on the property. In effect, all
the accumulated value in the house over the years would be received by that person tax-free.
When two parties enter into a joint tenancy,
however, half of the benefits of the step-up in
basis
http://www.dailyfinance.com/category/estate-

2. planning/ are lost. The survivor will receive
the step-up in basis on your half of the property, but retains his basis (zero) in his original half. If the
deceased joint tenant bought the home for $100,000, and the survivor sells it for $500,000, he will
receive a step-up in basis of $300,000 (the decedent's original investment of $100,000 plus $200,000
for the decedent's half of the appreciation). The survivor may be able to take clear title to the home
without problem, but when he goes to sell the home, he may find himself with a hefty capital gains
tax bill. For people who own significantly appreciated property, a joint tenancy with their children is
almost always not a good idea.
Liability Issues: Most people who put their children's names onto the title of their home do so with
the intention of eventually passing that home to their children when they pass away. What many of
these people fail to realize is that putting a child's name on the deed passes title to the property
now. The new joint tenant would become an immediate co-owner of the home. This creates a great
deal of risk, especially for older people who have paid off their homes and live on retirement income.
Suppose a senior puts her son on her home as a joint tenant, and two years from now the son gets in
a car accident and is sued. The senior may find that her home becomes the central asset in a battle
to collect a judgment against the son. The same problem can arise if the son loses his job and has to
declare bankruptcy. His creditors would see that he is a half owner of the home, and might try to
force a sale to recover their money. If the child owes back taxes to the government, then the house
is an available asset. The same goes for child support and other obligations.
In short, a joint tenancy with children is not the safest or
best way to pass property to the next generation of a
family. Although it is probably the simplest and cheapest
way to avoid probate, the hidden costs can be
astronomical. For individuals and families who are seeking
ways to avoid probate, it is generally advisable to set up a
revocable trust. A trust permits a person to pass property
to his or her children quickly and easily, without the hassle
of probate and its attendant fees and time delays.
By: David R. Morris
Article Directory: http://www.articledashboard.com
David R. Morris is an attorney at Morris Law Group, PLC. He specializes in estate planning, business
structures and transactions, and real estate. Morris Law Group is a business law firm that provides a
wide variety of professional services to families and businesses in the Northern California region.
David can be contacted at (916) 789-9810, at drmorris@morrislawgrp.com, or via his website at
www.morrislawgrp.com.
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Estate planning is about peace of mind. The procedure itself is vital as well as could assist you
create a great, solid working strategy that will certainly look after you, your children, and also your

3. possessions in situation of your fatality or impairment.