“THE LEGAL CORNER”
By Sam A. Moak
IS THERE A REASON I SHOULDN’T GIFT MY HOME?
The information in this column is not intended as legal advice but to provide a general understanding of the law. Any readers with a legal problem, including those whose questions are addressed here, should consult an attorney for advice on their particular circumstances.
I recently had a phone conversation with a client asking if he really needed a Will. He explained that his mother had transferred her home to him many years before she died. When she died, probate wasn’t necessary. “Is there a reason why I shouldn’t do that?” he asked.
Our conversation brought to mind a story I read about a 98 year old woman who had been sent an eviction notice by one of her sons. Mary Kantorowski has lived in her home since 1953, and intended to live there for the rest of her life. But her son, to whom she had deeded the property, believed she was too old to live alone. He wanted her to move into a nursing home or to live with him, something she didn’t want to do.
To force her hand, he sent her an eviction notice. Mrs. Kantorowski was devastated. She says she’s in good health and a judge has ruled her competent. The son, who was trying to evict her, lives just 20 minutes away but had not seen her in 8 months.
Like the gentleman who contacted me, Mrs. Kantorowski likely had the best intentions. Rather than having a Will drafted to pass the property after she died, she likely believed transferring her property during her lifetime would be less burdensome to her children. Unfortunately, by transferring the property to him, she relinquished control of it and exposed herself to some risk.
Besides giving up control of your property, below are a few more reasons why transferring property to your children during your life is not a good idea:
● There may be gift tax consequences as a result of the transfer.
● The transfer could prevent you from immediately qualifying for Medicaid for nursing home care if you transferred the property within five years of the date you apply for such benefits.
● Your home could be exposed to your child’s creditors, and sold to satisfy a judgment against your child.
● If your home has appreciated in value, your children may be exposed to significant capital gains tax when they sell it because they will assume your basis. In contrast, if the home passes upon your death, your heirs get a stepped-up basis, which means that they will only be responsible for capital gains taxes if the property sells for more than the value on the date of your death.
● The child to whom you deeded the property could unexpectedly die before you, and your home could be transferred to his or her heirs, who may not want you to live in the home.
Deeding your home to your kids before you die is risky and may result in unintended consequences. The best way to ensure that your wishes are followed is to have a properly drafted Will or trust.
Estate planning techniques and tax laws are complex. You should always consult with a qualified attorney and tax expert to assist you in such matters.
Sam A. Moak is an attorney with the Huntsville law firm of Moak & Moak, P.C. He is licensed to practice in all fields of law by the Supreme Court of Texas, is a Member of the State Bar College, and is a member of the Real Estate, Probate and Trust Law Section of the State Bar of Texas.