Leaving Your House

What is the Best Way to Leave House to Children?

Q. I am a recent widow, age 63, with three grown children. All of my late husband's assets and mine were held in joint tenancy. Of course, as the surviving joint tenant, I am now the sole owner and nothing went through probate. Neither our bank accounts, CDs, securities, or our debt-free house.

Just as all these assets passed to me with little or no hassle, I would like these assets to pass just as easily to my children when I die. With this in mind, is there any reason why I shouldn't put everything into joint tenancies with my children?

A. The passage of property held in joint tenancy works best when the joint tenants are related to each other as husband and wife. It might not be as wise when those joint tenants are related to each other as parent and child. Here are at least three reasons why.

Let's say that during the next 20 years or so you decide to sell the house. You might have eliminated up to three-fourths of the benefit of the tax-free exclusion of $250,000.00 capital gain on the house. You'd be the owner of only one-fourth of the house, and thus could exclude from income-tax liability only one-fourth of the capital gain.

The next reason can be summed up in one word: Independence. You now need all of your children's signatures to transfer, sell or refinance your property. Your efforts will be thwarted if one of your children refuses to sign.

But the most important reason by far is that any of your property held in joint tenancy with your children, or anyone else, could become subject to whatever financial or marital problems any of them might now have or encounter sometime in the future.

Perhaps a living trust might be the most appropriate estate planning vehicle for you. This will avoid all of the problems discussed above. You should consult with an attorney experienced in real estate transfers and estate planning. Please call THOMAS J. POLINSKI & ASSOCIATES, LTD. at 866-435-5828, if you wish to discuss these matters in greater detail.