QUESTION: With all the publicity about Probate Fees, I'm wondering if I should be putting my children's names on all my assets. That way, when I die, it will go directly to them without the government getting its bit.
Dear Tax Fighter,
The government is pretty good at getting "its bit". Sometimes trying to avoid tax can leave you outsmarting yourself.
Suppose you decide to put little Johnny on the deed to your house. Yes, when you pass away, you will avoid the Probate Fee, but have you thought about the following?
1. You won't be able to sell or mortgage your property without his consent. If you need to get your money out, you better hope you're still getting on with Johnny!
2. If Johnny gets sued or into a family dispute, his creditors or spouse may argue that his half of the house is one of Johnny's assets that should be used to pay his debts or settle his divorce.
3. If Johnny doesn't live there, its not his principal residence for tax purposes. If the two of you sell it, he may be responsible for capital gains taxes on his half of any increase in value since he went on title.
4. If you are getting a Senior's Tax Rebate on your property taxes, technically that would be canceled on Johnny's half - unless he's a senior, too!
5. If Johnny goes bankrupt, or has to rely on Welfare or a Disability Pension, it is possible that the authorities would require him to sell his share of your home.
WOW! All these problems to think about just because you want to avoid a Probate Fee that really isn't so much anyway. For example, Probate Fees on a $100,000.00 estate are $1,375.00.
REMEMBER, Your own circumstances are unique and, perhaps for some, the transfer is a good idea, but proceed carefully.....you might just outsmart yourself instead of the government!