We usually respond to this question by asking, “what are you trying to accomplish?” Some people want to avoid Probate to maintain their privacy, avoid delay and cost, or out of concern that someone may contest their Will. Others want to protect the asset from Medicaid or nursing home claims, to qualify for Medicaid – or to save taxes.
Here are some facts. When you make a deed to children…
- You give up control over your property – often including your right to live in the home.
- Children will often conflict over the maintenance and management of the property.
- If a child divorces, marries, has legal issues, or dies before you, the property and your family can become embroiled in legal conflict and subject to the rights of a spouse or children.
- “Improper” transfers to children cause Medicaid ineligibility and creditor issues.
- When the home is sold, the transfer will often result in higher capital gains taxes.
- The goals you can achieve are more limited – and achieving one goal often means loss of another.
As such, we recommend property pass by Will on your death, and if lifetime transfer is needed by Trust:
- Last Will &Testament.
- You remain in control of your property until death.
- A deed now does not protect privacy later or avoid “delay”.
- Deeds, like Probate, are public record and do not protect your privacy.
- Even if you deed you home now, Probate is often needed to transfer other assets.
- Probate takes 10 days in NJ, and (except during covid) 60-90 days in NY.
- Courts routinely allow property to be sold even while Probate is pending.
- Probate is not expensive. Probate is far less expensive than the tax and other costs of making an outright transfer now. Probate cost is about the same as setting up a Trust.
- A Will drafted and with the signing supervised by an attorney, will typically defeat a Will contest. If someone is expected to contest, then for the best result transfer to a Trust.
- Trusts. Trusts address property issues now and upon death without probate. A trust lets you:
- Plan how the property will be used and enjoyed by you while you are alive.
- Plan who receives gifts, what they receive, and when they receive it.
- Protect the asset from issues that may arise if a beneficiary marries or divorces.
- Plan alternate gifts if a family member predeceases you or your spouse.
- Protect assets for beneficiaries and plan for financial contingencies.
- Provide for your care, for Medicaid planning, and for asset protection.
- Appoint a Trustee to carryout your wishes spelled out in the Trust and manage the property.
Both Wills and well planned Trusts can be used to preserve and achieve tax benefits, and eliminate estate tax and capital gains tax on the sale of property after death, up to date of death property value.
Which is the better choice for you? That depends upon your specific goals, finances, family circumstances – and your age and health. If you need help in creating and carrying out your plan, we are here to assist.