It is not uncommon for individuals to transfer their assets to their adult children while they are still alive. They do so because they believe it will simplify things for their loved ones if something should happen to them. However, while there may be legitimate reasons for transferring assets into your child’s name, it can also lead to numerous pitfalls.
If you want further information about the proper timing of gifts, contact an experienced estate planning attorney at Losavio & DeJean and schedule a consultation with our team.
Unintended Outcomes
It is generally not a good idea to transfer assets to your loved one during your lifetime. This is due to a number of reasons, including the following:
- Your child may end up going through a divorce, which can result in assets being passed to their ex-spouse
- Your child can have debt resulting in the attachment of assets
- Your child can become disabled and require care
- Your child can die unexpectedly, leading to the asset being transferred to their spouse or other beneficiaries.
In any of these situations, transferring assets into your child’s name could lead to those assets being taken by another party, making them unavailable to meet your own needs. As a result, the risks are often significant enough to make transferring assets to your child not the best choice.
Tax Consequences
If you put assets into your child’s name, the income tax basis may transfer to your child. If the asset has significantly increased in value since you bought it, this could lead to negative tax consequences. However, if you pass away while still owning the assets and your child inherits these assets, the asset’s basis will be adjusted to the fair market value at the time of your death. This adjustment helps in saving capital gain tax when the asset is sold.
You Need Your Assets
When considering passing assets to a child, your top priority should be ensuring that you have enough assets available for your own needs and care. Passing on as many assets as possible to your beneficiaries should only be a secondary consideration.
Other Ways To Transfer Assets
Rather than subjecting yourself to unnecessary risk, there are numerous estate planning options that can help you transfer assets while still protecting your goals besides simply adding your child’s name to your asset.
For instance, a trust is a powerful estate planning tool that helps transfer assets from generation to generation while still allowing individuals to hold onto their assets. In addition, a power of attorney is another option many people use to protect their assets. This legal document allows another individual, such as your child, the authority to manage your investments, bills, taxes, and real property transfers. However, with a power of attorney, your child will not have any ownership interest in the assets. This means that if the child is to get divorced or file for bankruptcy, their former spouse and creditors cannot touch the assets or property. More importantly, the document can be drafted to limit your child’s responsibilities and authority over your property and assets.
Learn More About Protecting Your Assets, Contact Losavio & DeJean Today
At Losavio & DeJean, LLC, we understand that every family is unique, which is why personalized estate planning services are essential to meet your specific needs. Our experienced estate planning lawyers work closely with clients, financial advisors, accountants, and other professionals to help manage your affairs. Whether you are a business owner or want to preserve your wealth for future generations, we are here to assist you.
For further information about the pitfalls of putting assets into your children’s names or the best ways to transfer these assets, contact Losavio & DeJean, LLC today.