Thursday, May 5, 2011

How to Hold On To Your Property

The woman wanted to add her daughter to her bank accounts so she could pay her bills and have access to mom’s money in case of an emergency. So, against her attorney’s advice, she added the daughter to the accounts.

Then one day she discovered $67,000 was missing.

No, the daughter didn’t take it. The IRS did.

It turns out the daughter owed taxes to the federal government and once she became a co-signer, she also became a co-owner of those assets. The bank account was deemed community property and the elderly woman learned a valuable lesson on a common mistake senior citizens make as they advance in years and are reduced in health.

This was just one example La Jolla attorney Heidi Klippel told caregivers during last week’s Town Hall Forum. The topic was estate planning, and Klippel had plenty to say about the best ways to establish a legal decision maker and the documents needed for them to handle a parent’s finances once they can no longer do so.

“There’s a risk any time you put someone else on your asset,” she said.

That includes adding children to the title of your house.

The attorney related a client who put her daughter on the title to her house. The daughter was under insured when she was involved in a drunken driving crash and, as co-owner of the house by title, had the property seized to help pay a settlement, rendering both her and her mother homeless.

Instead of adding adult children to assets, Klippel suggests parents establish living trusts to “house” property and other assets as a way to avoid probate after they die. Trusts are established for specific reasons and provide the following benefits:

  • Allow a designee (or “trustee”) to manage your assets should you become unable to do so yourself
  • Avoid probate and transfer your assets immediately to your beneficiaries
  • Reduce or at least provide for payment of estate taxes
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