For many Utah residents (and for most people in general), their most significant asset is their home. In an effort to avoid the probate process, or save the money required to create an estate plan, many people transfer title to their house while they are still alive. In most instances, a parent transfers title to their home to an adult child, believing this is an inexpensive and simple answer. Sadly, this can lead to serious complications for you and your loved ones.
Two important factors to consider are that by transferring title to your home, (i) you lose your homestead exemption for protection from creditors, and you are no longer entitled to a reduced property tax because it is not an owner occupied primary residence. This can cost you thousands of dollars.
Another concern is that you lose control over the rights to your home. If you should have a dispute with your child, you could potentially lose the ability to live in your own house! Your child (or children) owns the house, and without providing more, he or she does not have a legal obligation to let you continue living there (unless otherwise provided by contract). Additionally, you have no control over what can be done to your property, such as renovations, but also with your home being used as collateral for loans. What happens more often is a child has creditor problems of their own and their judgment creditors then have liens on your home!
Finally, you should also consider whether transferring title to a child will cause problems at your death amongf your other children. The child that owns your home has no legal obligation to share it with his or her siblings. What happens at death when that child faces the other children and simply states that he doesn’t intend to share?
To remedy this, some people put the names of all of their children on a deed to their home. However, if you put all of your children’s names on the title to your house, it can make the documentation very complicated and it leaves the home more vulnerable to attack by creditors and even more complicated. For example, what happens if one of your children dies before you do? Who then owns their share of the house? And even if your children cooperate with you, will your inlaws or grandchildren? What happens if you want to sell the home and use the proceeds to buy a smaller home or for your support in old age? One holdout can jam up the works and you can’t sell your house! You can see that this creates serious complications and is never a recommended plan.
More often than not, the arrangement that sounded so simple becomes seriously complicated and costly and results in litigation in your estate. It is far more costly than preparing a sound estate plan. And the worst thing is, it doesn’t carry out your wishes.
Creating an estate plan is a safer, more efficient and less costly means for transferring all of your important assets. If you want to avoid the probate process, you can create a revocable living trust. This type of trust provides you with flexibility to decide when and how your estate is distributed. A trust can actually save your family a significant amount of money, time and disputes in the long run and you can be assured that your intent is carried out under all circumstances.
The Astill Law Office has provided high quality legal services for over 30 years. We specialize in wills, trusts, estate planning, and asset protection. If you have any questions about creating a Trust, Will, or estate planning in general, contact The Astill Law Office at 801-438-8698.