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When I was a kid we used to get Mr. Yuk stickers at school. The idea behind the Mr. Yuk stickers was to bring them home and your parents would place the stickers on the dangerous stuff around the house a child could get into, with the hope that little Jimmy wouldn’t guzzle the paint thinner. I myself have never guzzled paint thinner or chugged Drano (paint chips- that’s a different story). On some level the Mr. Yuk stickers on worked, my parents never had to call poison control. I wish I had a Mr. Yuk Sticker to place on the foreheads of parents who want to hold property as joint tenants with their children. Let’s see, how can I put this? DON’T HOLD PROPERTY AS JOINT TENANTS WITH YOUR CHILDREN. Are we clear? This has been the source of numerous problems for my clients. Aside from the loss of a stepped up basis and gift tax issues (when you put your home into joint tenancy with your kids it is a taxable gift) transferring some or all of your interest in the house over to your children puts your house in jeopardy. Many people feel that by transferring there house or an interest therein protects the home, the effect of this transfer has quite the opposite effect. Your child (as the transferee) could get sued or divorced and this puts your house in serious jeopardy. If you transfer interests in your house to several children, you could easily double, triple or quadruple the liability on that piece of property. There are more effective mechanisms to limit the liability on the property and protect the property from lawsuits and Medicaid issues.
Life insurance can be a powerful estate planning tool, if it is properly positioned. If not, it can be disastrous. Life Insurance can do many different things depending on your needs. It can be utilized to pay estate taxes, or to equalize an estate between multiple heirs. Life insurance proceeds are income tax free. When people are buying life insurance many of them just hear the words “tax free” and this is where the problem comes in. Life insurance proceeds are not necessarily estate tax free. Proceeds of a life insurance policy payable to your estate are includable for estate tax purposes, and are part of your probate estate. So if you or your revocable living trust are the beneficiary of your life insurance policy, those proceeds will be looked at when calculating whether or not you owe an estate tax. There are many good reasons for having your life insurance pointed at your estate, mostly having to do with control.
Daughter Recovers Ring Stolen From Her Father’s Body. By Arielle Levin Becker/The Hartford Courant, May 14, 2009.
Corinne D’Onofrio spent the day by her 82-year-old father’s side as he lay dying in the hospital. On his finger he wore a gold ring with a black onyx and a diamond, a family heirloom that she imagined giving to her son one day.
She tried to slip the ring off, but her father’s finger was too swollen.
Don’t worry, D’Onofrio’s husband told her, the funeral home can take care of it.
But someone else beat them to it. And by the time D’Onofrio’s father, Albin Schultz, was taken to the funeral home, there was no ring on his finger — just an indentation where a ring used to be.
Police said that the ring was stolen by Hector Mateo, a transportation aide at Hartford Hospital who took Schultz’s body to the morgue, according to court records. Mateo told police that the ring looked like a ring from his first marriage and that he decided to take it.
Mateo, 29, of New Britain, has been charged with fifth-degree larceny and third-degree forgery. He was arrested on March 16 and is scheduled to appear in court again June 9. He has not yet entered a plea.
In addition to stealing the ring, Mateo is accused of altering a hospital form that showed that Schultz had a ring on his left hand. A Hartford Hospital investigator found that the form listed “Ring on L Hand,” but that there was “scratchy writing over it that was attempting to spell ‘Brace on L Hand,’” according to an arrest warrant affidavit.
Mateo is no longer a Hartford Hospital employee, a hospital spokeswoman said.
When police interviewed him, Mateo initially said only that he saw the ring, but later told police that he took it and tried to cover up the theft. In subsequent conversations, he told police that he was “extremely remorseful,” that he “didn’t know what he was thinking” when he stole the ring and that he was sorry “deep down in his heart,” according to the affidavit.
Mateo, who could not be reached for comment, gave the ring to police. It eventually made its way to D’Onofrio, but only after what she considers an unnecessary runaround dealing with the hospital and the police while she might otherwise have been left to grieve for her father. She put off the arrangements for her father for a week, wondering if the police might need to see his body as evidence.”To think that some lowlife would take something off your mom or dad’s dead body for their own gain,” she said.
In my day to day practice, I see one issue come up often: Outdated Estate Planning Documents. Even though these documents are often drafted with skill and plan for events that will not happen for years, they are in need of some serious updating. Some clients wait twenty or thirty years between updating their wills, trusts and other documents. A lot can change in twenty years. Geez, a lot can change in a year, or a moment for that matter.
A Will that is out of date may not be any better than having no Will at all. That Will that was executed twenty years ago probably needs to be updated; people have been born, some have died, some grew up to be great people, others grew up to be not such great people. There have been divorces, remarriages. All of these things change the way people plan their estates.
Your estate plan should be reviewed every few years, and more often after the happening of certain events. Your plan should be reviewed upon birth, death and adoption of a child, a marriage or divorce, tax changes, the death of someone named in your current Will/Trust, changes in income/wealth, and any other major life change. Consider giving yourself an annual estate planning checkup. Once a year take out your estate planning documents, and your life insurance policies and other important documents and read through them. Make sure that your plan conforms to your wishes, if they don’t, do what is necessary to make the changes you desire. Check your beneficiary designations on your life insurance policies- are they correct? Make sure that the proper people are listed as beneficiaries. Often, ex-husbands and ex-wives are listed as beneficiaries of life insurance policies because they were never removed after a divorce.
Be sure to also check your Power of Attorney- make sure you have the right person in place to be your agent should you become incapacitated. Also, check your Living Will to ensure that it conforms to your wishes and that your agent under the Living Will is the right person. When looking over your Power of Attorney and Living Will make sure that the documents have a HIPPA authorization. A HIPPA authorization permits your agent(s) to get medical information from your doctor. Without a HIPPA authorization on these documents it will be difficult, if not impossible to get vital information from your doctor, which is often necessary to make well informed decisions.
An ounce of prevention is worth a pound of cure- give yourself an estate planning checkup today!
Even though it’s a dangerous move to make, it is very common for parents want to gift their house to a child (or children). Many parents feel a strong need to give their house to their children. Most of the time the kids don’t really want the house, they want the “cash equivalent”of the house. The transfer of your house to your children has some very serious ramifications. Transferring some or all of your interest in your house over to your children puts your house in jeopardy. Many people feel that transferring their house or an interest therein protects the house. This type of transfer has quite the opposite effect. Your child (as the transferee) could get sued or divorced and this could put your house in serious jeopardy. If you transfer interests in your house to several children, you could easily double, triple or quadruple the liability on that piece of property.
Beyond expanding the scope of liability on a particular piece of property, other negative ramifications flow from the transfer of your house to your children. When you gift a piece of property, such as your house, you should consider the tax consequences of making such a move. When you bought that house many years ago, you probably paid a fraction of what it is worth today. That amount you paid is your “Cost Basis” or “Basis.” The basis is used how to determine how much profit you will eventually make on the sale of your house. When you convey the house to your child a gift is made. The basis in the property/gift is whatever you paid for the house (your basis). When your child sells that house, the capital gain will be calculated on your basis (the original basis). This situation creates a potentially large capital gains tax liability. This issue can be avoided by changing how the property is transferred to your child. If you were to pass the house (or any piece of highly appreciated property) at death through a Will or trust, the basis will be “stepped up,” meaning that the basis will be whatever the property was worth at the time you passed away (the date of death value). Because the full step up in basis, the potential fora capital gains tax issues is greatly reduced or eliminated.
There are many reasons why people “want” to transfer their house to their children. Most of the logic behind the transfer is flawed. People should seriously consider the down side of this transaction before they make the transfer. There are more effective ways to protect the home and still pass it on to your children. Consult an attorney before making any transfer of your home to your children!
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