One of the most common questions I get from people, especially the elderly, is whether they should transfer their home to their children or grandchildren now. Their thinking is that by transferring it now, it will avoid probate when they die, and also, they can avoid paying for more complicated estate planning. Of course, that’s not the way the way the question is asked. It’s almost always, “Can I put my children on the deed?”
Joint tenancy, tenancy-in-common, and ladybird deeds
Now I don’t expect laymen to know the difference between joint tenancy with rights of survivorship or tenancy in common, in which the new person becomes a co-owner now, and an enhanced life-estate or “Ladybird” deed, in which the child doesn’t inherit the property until the parents’ death. Ladybird deeds are ok in certain circumstances, although I don’t always love them with Florida homestead.
Making your child or grandchild a current co-owner of your home with you, either as a tenant-in-common or as a joint tenant with rights of survivorship is almost always a bad idea. There are certain limited exceptions. But if your adult child does not live in the home with you, and no one in your family is disabled or on government benefits (other than regular social security), then these exceptions do not apply. There are also certain times in which a home will be transferred to a certain type of irrevocable trust, prepared by a competent estate planning attorney, for either medicaid planning or tax planning purposes. And in certain circumstances it’s ok to transfer your home to a revocable living trust.
But the worst possible thing to do is to transfer the entire property to your descendants outright.
The reason why we advise against transferring all or part of your home to your descendants is that once you transfer it to them, they are now a owner of the property. A client was telling me how proud she was of her son the obstetrician, and wanted to make him co-owner of her house. This would avoid probate, and let him take care of it and her if she becomes disabled. I asked if she knew whether or not her son had medical malpractice insurance. Like many obstetricians, he had “gone bare,” so had none. I advised her that she did not want to lose her home the next time her son was sued.
What’s the worst that can happen?
People will ask what’s the worst possible thing that can happen if they “put their grandson’s name on the deed?”
How about having your home of 60 years foreclosed on and being evicted, because your grandson mortgaged your home to the hilt, sold it to a third party without you knowing, and then defaulted on the loans?
That’s what happened to Helen and Hank Kawecki of Ventura County, California. According to the article, the Kaweckis, both in their late 80s, transferred their home to their grandson, who in return, was supposed to take care of them. Instead, he obtained three mortgages on the house, didn’t pay the loans, and then sold the house to a third party. The Kaweckis’ house was foreclosed upon, and they are now being evicted. It is only because of the kindness of a neighbor who started a GoFundMe page, that they are able to move into a mobile home in a retirement community. As of this writing, the GoFundMe page has raised $127,855.
And I know exactly what you’re thinking. “Not my children.”
I”ll let Helen Kawecki answer that for you:
It’s hard, very hard, to leave this. But we don’t have any choice. And I didn’t ever think my grandson would ever do this to me. Ever.”