I am constantly amazed at the number of individuals who come into my office and make the statement that, “they want to transfer their real estate to their child or someone else to avoid probate because the State will take their property.” My first question is always, “why do you think the State will take your property?” The usual response is, “someone told me that is what happened to their parents.” While there are a lot of well-meaning non-lawyers practicing in East Tennessee who are willing to give out all sorts of free advice, probate is not the evil that it is alleged to be.
The simple fact is, that is not what happens under normal circumstances. True, there are rare instances when the state can place a lien on the testator’s property to recoup funds the State paid out for long term care under TennCare, or if the decedent had significant debts, the estate may be required to sell the property should the estate not have the necessary funds available to pay the lien or creditors. However, for most folks this is not the case.
By transferring that property to your child, children or some third party during your lifetime, you have effectively removed that asset from your estate. However, should you need to liquidate that asset during your lifetime you are going to have to involve your child, children or the third party in selling or mortgaging that property. If they do not want to do so, then you may be out of luck, or worse, you will find yourself in the courtroom attempting to regain your asset. A costly and drawn out experience! (There are issues with transferring this property to “spend down” for TennCare qualification purposes, but that is a topic for another article.)
Also, there are tax consequences involved. The IRS considers these transfers to your child or children as gifts to be taxed. The current gift that each parent may give to each child without tax consequences is $14,000.00. Let’s say for example your home has a value of $90,000.00, and you transfer that property to a single child. Even if you and your spouse are both living and convey the property jointly you may only transfer $28,000.00 during a tax year to that child without a gift tax consequence.
Probate is not a way for the state to make a grab for your property after your death. What probate does do is secure your assets and make sure that your estate is distributed as you directed under your will, or by the statutory language in our laws if you do not have a will. Further, it imposes a time limitation on most creditors to seek recovery from your estate after your death. It also creates an opportunity to verify debts or claims against your estate and an opportunity to object to them if your estate believes the claim is not legitimate.
Finally, probate allows the estate to be administered by your appointed representative through the court and create a public record for clear chain of title. Thus, issues that may arise down the road when your heirs go to sell, mortgage or pass on the asset are cleared up quickly by a search of the probate records in your resident county.
Probate is not a way for the State to make a grab for your assets upon your death or cheat your heirs. Probate is a process that protects your wishes and insures the proper distribution of your estate.
For answers to any questions regarding probate or any other legal matter, please contact us and we will be glad to discuss the specifics of your issue.
Estate planning can be daunting, but it can also help ease the pain, confusion, and doubt for your loved ones. Estate planning allows for you and your family to have peace of mind when it really matters. Our passionate legal team can help assure that your last wishes are achieved your way.
A will speaks FOR you, and establishes your ultimate decisions regarding your personal property, like family heirlooms, real estate, and other valuable assets.
Probate administration is the way the instructions set in your will are carried out.
Power of Attorney
A Power of Attorney is a written authorization that specifies someone to act on your behalf if you are physically or mentally unable to do so.
Specifying your objectives end-of-life decisions ahead of time can help alleviate the burden for your loved ones.
A trust is an alternative to a will, and can include different options depending on your situation