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When good money intentions lead to poor outcomes – Press Telegram

I’ve seen it happen many times. Parents believe that their property is simple and that their children are all on good terms. Therefore, parents avoid doing real estate planning and instead implement real estate planning that attempts to treat their children equally, whether it is fair or not, by giving the property a creative title.

In many cases, it is these actions by parents that cause dissonance among children.

No real estate plan

A common action taken to avoid a real estate plan is to own the property (usually a family home, but also a bank account) as a “co-tenant” with another party, with the first party It’s about getting your assets to move to a co-tenant when you die. This works in limited situations. Only one beneficiary is eligible and the life expectancy of the party owning the asset is short.

A parent who owns one child as a co-tenant with the intention of one child “sharing” with another is a disaster waiting to happen, no matter how well-meaning. There are no legal requirements to support Freddie sharing with his siblings after the death of his parents.

Freddie may find him “worthy” of money or other property and keep it for himself. This is often the case when the child named in the account or real estate is also the child who mainly took care of the parent before he died. The child’s resentment towards the less involved siblings may overshadow their judgment about doing what moms and dads wanted. There is no legal means for other children.

Also, while both names are in the account, creditors of both parties may be able to seize the account. A creditor may acquire assets before his siblings if he has an IRS Lien or another creditor there, even if the favored Freddie means to follow his mother’s wishes.

Even if assets pass creditors after the death of their parents and Freddie is proceeding as mom or dad wants, Freddie needs to consider the tax implications of reducing siblings. All transfers from Freddie to his brother will be considered. A gift from Freddie.

If the annual gift tax exemption per donor is less than $ 15,000, the gift tax will not affect you. If it exceeds that amount, Freddie will have to run out of some of his own gift / inheritance tax exemptions. If Freddie becomes a taxable property, it does not make Freddie’s own heirs happy. Income tax effects can also occur if Freddie has to liquidate her assets to pay her siblings’ shares.

Pay with death account

At some point in the last few years, banks must have decided that it would be easier to deal with the “pay on death” designation than the client’s actual wishes set in the trust.

Too many clients have recently faced a bank clerk who advised us to just fill in a bank account instead of opening an account in the name of a trust after we carefully discussed and created a real estate plan. .. “Pay on death” form.

This form is rarely enough to cover the plans made. “If you are not this person, you are this person, but that person is never” is created in a trust and you cannot hold your assets in a trust. Of course, it doesn’t help if the client doesn’t have the ability.

In short, don’t get legal advice from bankers — no matter how good their intentions are.

Trustee’s mistake

About selection of trustee

Even if a real estate plan that includes wills and trusts is enacted, good intentions can have bad consequences. Clients can find it difficult to choose a trustee. They don’t want to appear to support someone more than anyone else, or they don’t want to burden their family. These are valid concerns.

The work of the trustee is a serious work and requires time and attention. Some trust administrations last up to a year after the trust company’s death, many continue several years later, and some continue for generations.

Parents often tend to nominate the oldest child, all children, the child who lives closest, or the child who has the most time as a trustee. None of these are good reasons to choose a trustee.

If you are going to choose a child as a trustee, choose the one with the best financial sense, the one who makes the best friends with other children, the smartest one, the one with the best fairness, the most organized child. Please, or the best looking one (OK, I’m kidding about the last one).

1 trustee

Note that we say “one”.

One trustee, who makes decisions, implements trust terms, and is the primary point of contact for beneficiaries, accountants, and lawyers, is generally the best approach. If you have only two children, be sure to name both. If they disagree, they are only hurting themselves.

But what if one of them is really unreasonable? Does your spouse affect them more than you want? Can a person travel extensively and use it to share their work?

In these and similar situations, name only the other children. Naming three or four co-trustees is awkward at best. Trustees can sign many documents and forms, not all electronically. Many require notarization. In addition, if the votes are tied, nothing is done. It is expensive, not to mention that lawyers and accountants have to talk to multiple trustees.

Real estate planning is one of the areas where your good intentions to keep things simple and cheap can have lasting and terrible consequences. As Thomas Edison once said, “Good faith with a bad approach often leads to bad results.” Having a carefully thought out real estate plan is a gift to your family and other beneficiaries. It’s your last gift. It is worth the time to make informed decisions.

Teresa J. Rhyne is a lawyer practicing real estate planning and trust management in Riverside, California and Paso Robles. She is also the New York Times best-selling author of “The Dog Lived (and So Will I)” and “Poppy in The Wild.”You can reach her Teresa@trlawgroup.net

When good money intentions lead to poor outcomes – Press Telegram Source link When good money intentions lead to poor outcomes – Press Telegram

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