Q Can’t I just put my children’s names on our home, bank accounts and other assets?
Never, ever do this! If you put your children’s names on your home, bank accounts and other assets, you’ve given them a share of the asset. If you give them a gift over $13,000 per year per person, you will have a gift tax problem.
You have also given away a valuable tax advantage. Let’s assume you give them a stock when it is worth $10,000 that you bought for $100. They will pay taxes on the $9,900 difference. If you had given them the same stock upon your passing, there would be no tax due because of the differences in what is called carry-over versus step-up basis.
If your children were to have a creditor’s claim against them, the creditor could attach your assets because your children’s names are on them. That means you could lose stocks, savings, etc. to your children’s creditors.
If you put your children’s names on the title to your home, you have huge potential problems for you and your children. If you sell the home, you and your spouse will have the capital gains exemption for the sale of your primary residence but your children will NOT. That means they will have to pay the capital gains tax. Also, if one of your children gets divorced, it is possible that their soon to be ex-spouse could sue for the sale of the home if there are insufficient other assets to pay them out. Yes, you read that correctly, you children’s soon-to-be ex-spouse has an ownership interest in your home even if it is only your child’s name on the title with you. That is because Minnesota law gives spouses a marital interest in real property even if their name is not on title to the home.
To illustrate this point, I once had a client come to me for legal help. After his wife’s passing, his previous attorney advised him to put his children’s names on his home, bank accounts, brokerage accounts and other assets. Unfortunately, his daughter became disabled and applied for government benefits. Her ownership interest in her father’s assets disqualified her for the help she needed. To further complicate the matter, his son’s broker had invested with Tom Petters. Even though the client’s son knew nothing about the investments his broker made on his behalf, his father’s assets were now fair game for the government officials looking to recover assets – my client’s entire life savings were at risk simply because his son’s name was on them. When I explained all of this to him, he could not understand why his previous attorney had advised him to do this. I told him, I couldn’t understand it either.