And AVVO is Not Always the Place To Get Good Legal Advice
An AVVO user posted this plea for free legal advice this morning:
How and where can I add my son’s name to my paid off house deed? Years ago my mother put my name on her house deed so in the future the house would be mine no questions asked. Now it’s time for me to add my son’s name to my house deed. Where do we go and what do we need? Thank you!
Let’s see what other lawyers responded and then let’s see what I, as a good LifeCycle Lawyer responded.
One lawyer, who is a lot like me demographically, (he has been practicing law for more than 28 years and has handled hundreds of automobile accident and worker’s compensation cases as well as numerous DUI’s, driving on a suspended license, MVA hearings, and criminal defense cases, and, like me, he has a perfect 10.0 rating on AVVO, numerous endorsements, and excellent client reviews), except he doesn’t practice LifeCycle Law, said this:
“You should consult with a real estate attorney who can prepare a Deed for you.”
This was actually a good thing for him to say. If you don’t know the right thing to advise, then send them to someone who may know better than you do the right thing to advise. But, not all real estate lawyers who predominantly prepare deeds, will consider the LifeCycle effects of adding a child’s name to a house deed. Many do, some don’t. So, be careful who you ask such questions.
Now, another lawyer, who’s demographics track mine (same age, same number of years of practice, but only concentrates on personal injury, construction law, and criminal and traffic defense, and advising business clients, negotiating and drafting contracts, and handling a variety of civil litigation matters at all levels of the state and federal court systems) answered thusly:
You can do it one of two ways. You can deed the house from you to both you and your son as joint tenants with right of survivorship, or you can leave the house to your son in your will.
There is a significant tax advantage to leaving your house to your son in your will rather than adding his name to the deed while you’re living. If you add his name now, he will have the same tax basis in the property as you have, and your tax basis is whatever price your mother originally paid for the house.
What that means is, if the house is sold by him one day, he pays capital gains tax on the difference between the sales price and your mother’s original purchase price. However, if he inherits the house after you die, his tax basis jumps up to the fair market value of the house at the time of your death. Then, if he sells it, there’s no capital gains tax. That could be a substantial savings. Also, putting your son’s name on your deed would expose the property to his creditors if that is a potential issue.
There is actually a third way, more expensive to set up, which involves putting the home into a trust, naming you as beneficiary until your death, then distributing it to your son upon your death. This method could also be used as part of an elder care plan to protect and preserve the property from counting against your Medicaid eligibility for long term nursing care.
Which of these methods is best for your circumstances and goals is what estate planning is all about. Consult with a lawyer and make an informed choice that meets your needs and concerns..
That lawyer gave a really good answer on AVVO. The next lawyer after him to comment, i.e., me, both recommended the questioner hire that lawyer if he was close to the questioner and explained the financial results just to make the questioner aware of the real money at stake.
I wrote:
But before you do that, be sure to talk to a LifeCycle Lawyer to be sure there will not be any adverse results from adding your son to the deed for your and your mother’s home.
Here are a few things to consider, based on a case I worked on recently. Assume your mother bought the home for $50,000 50 years ago and it is now worth $250,000. Now, look at the difference between willing the home to you on her death in the not so distant future and giving the home to you by adding your name to her deed today.
If you inherit the home by will (or intestacy), then you get the cost basis of $250,000, which the the value on the date of death. If you get the home by adding you to the deed, then you get half of the home at the original basis of $50,000 and half at $250,000.
Now, suppose you already have a home and you want to sell mom’s home and invest the proceeds. If you inherit the house at a $250,000 basis and sell it at the $250,000 current value, then you have no capital gain on the sale and no capital gains tax.
But, if you got the home by being the surviving owner on the deed, your basis is $150,000 (half at $50,000 and half at $250,000), which means you had a $100,000 capital gain. If you make $50,000 a year, you will be paying a 22% tax on that $100,000 or $22,000.
There are better ways to be sure you end up getting the house after mom dies than just getting your name put on a deed.
Most lawyers responding to Avvo questions are not LifeCycle Lawyers. They only look at what you say you want now, instead of getting to know you and see what’s the best way to get you what you want now at the least total cost over the rest of your life. They are not looking at what happens for the rest of your life. That’s what LifeCycle Lawyers do.