Some local residents might be tempted to come up with short-cut methods of New York estate planning. Unfortunately, many of these efforts not only fail to work as intended, but they may actually lead to many unintended consequences. For example, some senior residents may be tempted to protect their family home–often their largest asset–by transferring ownership of the home to an adult child. There is a misonception that this is a smart way to protect the home from potential long-term care costs, save on estate taxes, and avoid probate.
While this step is well-intentioned, it is crucial that local families understand the serious risks of this move and the superior alternative methods of accomplishing the same goals.
A Huffington Post story this week shared a cautionary tale of one senior that took this step, only to learn of the unintended consequences far too late. An adult daughter and her family moved into the elderly man’s home after the man’s wife died. Eventually, for the purposes mentioned above, the senior transferred ownership interests in his house to his daughter. However, not long after this step, tragedy struck–the adult daughter died unexpectedly. The 34-year old had not conducted any estate planning–she did not even have a will.
Under intestacy laws in the state, all of the daughter’s property was split between her husband and her 4-year old son. As the minor child’s parent, the son-in-law effectively became sole owner of the home in which his father-in-law lived. Eventually, the son-in-law began dating again and decided that he did not like his father-in-law living in the same home. He asked the senior to find other living arrangements. There was little that the elderly man could do.
Even though this chain of events might seem remote, similar situations occur more than many might expect. When assets are transferred to children, those assets are exposed to the adult child’s vulnerabilities, including things like divorce, bankruptcy, and judgment creditors.
In addition, home ownership transfers come with other complications. For example, protecting assets from long-term care costs is rarely as simple as transferring title to a child. New York Medicaid has a “look-back” period, and so if the transfer occurred within five years of the senior’s application for program participation, there may be a penalty. Also, all transfers may have gift tax implications. Failure to take those implications into account can be troublesome.
Each New York City elder law estate planning attorney knows that local residents are almost always better off when they have professional help with these issues. Various trusts can be created to accomplish the same goals–saving taxes, avoiding probate, protecting assets from healthcare costs–without the risks.
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