Avoid Traps Planning your Estate | Legacy Assurance Plan

1. Avoid Traps Planning your Estate | Legacy Assurance Plan

2. Avoid Traps Planning your Estate | Legacy Assurance Plan When have medical issues, we usually go to a doctor to obtain treatment that we can trust is reliable and avoids risky methods of addressing the problem. Consulting an attorney for a legal matter, such as an estate planning need, works similarly. Your estate planning attorney can help you go about addressing your need in a way that you can trust. This type of help in planning can be essential because, for every trustworthy way to meet your needs regarding avoiding probate or accomplishing other objectives, there are as many unreliable traps that can ensnare your estate and your family in a mess that may cost considerable time and money to fix or, worse, lead to an outcome that is different from what you wanted.

3. Avoid Traps Planning your Estate | Legacy Assurance Plan With that in mind, here are a just a couple risky probate-avoidance methods that are examples of potential traps that can exist for you: 1. The pocket deed. This a deed that you execute signing own your home or other real estate to the person you want to have it upon your death. In a perfect world, this method works because the deed doesn’t get recorded until you die, so you are able to continue possessing that property until after your death. Unfortunately, ours is not a perfect world. If, for some reason, that deed gets executed during your lifetime, you could be thrown out of the property immediately.

4. Avoid Traps Planning your Estate | Legacy Assurance Plan 2. Adding your desired beneficiary to your home’s deed. Some people seek to avoid probate by simply recording a new deed on their home or other property listing both themselves and their desired beneficiaries as co-owners of the property. In that way, the beneficiary takes 100% ownership of the property when they die.

5. Avoid Traps Planning your Estate | Legacy Assurance Plan This method is used much more commonly than the pocket deed. A lot of writers have written about the potential downsides of using this method and you may even already recognize this as a risky way to avoid probate. But even if you do already know that this is dangerous, you may not fully realize, at first glance, just how dangerous it can be.

6. Avoid Traps Planning your Estate | Legacy Assurance Plan Just like with a pocket deed, you have the risk of losing the property if your beneficiary gets sued or gets divorced. With this method, you can also create gift tax problems, since, if your beneficiary paid nothing to you, the IRS views what you’ve gone as giving a gift of 50% of the property. This means filing various tax forms and possibly paying gift taxes.

7. Avoid Traps Planning your Estate | Legacy Assurance Plan In some states, if you still have a mortgage on the property, adding someone to the deed can require you to pay a certain type of real estate transfer taxes on one-half of the outstanding balance of the mortgage. This can potentially amount to thousands of dollars in taxes. Another massive problem that can arise after using this method in some states is that it can cause your property to lose its homestead exemption. Losing a homestead exemption can potentially raise your annual property tax bill by thousands of dollars.

8. Avoid Traps Planning your Estate | Legacy Assurance Plan Also, adding your deed makes your beneficiary more than just a silent co-owner during your lifetime. That person has all of the same rights you do. You cannot sell the property, refinance the property or take out another mortgage on the property without the approval of your new “co-owner.”

9. Avoid Traps Planning your Estate | Legacy Assurance Plan Legacy Assurance Plan is an estate planning services-company and is not a lawyer or law firm and is not engaged in the practice of law. For more information about this and other estate planning matters visit our website at www.legacyassuranceplan.com.