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DIY Estate Planning Mistake #2: Putting Other Names on the Deed

Posted by Nina Whitehurst | Sep 17, 2019 | 0 Comments

I see a lot of "do it yourself" (DIY) estate plans come in the door that need serious repairs.  I have arrived at the point where I can rattle off the typical mistakes off the top of my head, and I can almost see them coming a mile away.  I see these mistakes so often I decided it was time to write some blog posts about them, and I have developed a seminar around them. 

Here is DIY estate planning mistake #1:  Putting the names of your intended heirs "on the deed"* to real estate, often the primary residence but sometimes other real property as well.  This is poor planning for many, many reasons.   Here are some of the reasons, in no particular order.


  • When you grant an interest in real property to another person without charging them fair market value, what you have done is make a gift.  Gifts have tax consequences.  If the value of that interest is greater than $15,000 (the annual gift tax exclusion in 2019), which is highly likely, you have just used up some of your lifetime gift and estate tax unified exclusion AND you have technically incurred the obligation to file a gift tax return.  You should not do this without discussing these consequences with an estate planning attorney AND your CPA.
  • Lifetime gifts also have adverse income tax consequences for your beneficiaries after you die.  You see, if you had waited until you died to transfer the property (e.g. by will or trust), your beneficiaries would have benefited from a step up in basis to date of death value, meaning they could sell the property free and clear of capital gains tax.  But by gifting it to them during your lifetime, the basis of the interest in the property that you gifted to them is the same as what your basis was in that interest when you gifted them.  If the property has appreciated in value, they will end up having to pay tax on that appreciation when they go to sell the property after you die.  That outcome could have been completely avoided with proper estate planning.


  • Lifetime gifts can't be taken back.  Many a parent has been talked into gifting some or all of the parent's property to one or more children during lifetime, in outright transfers.  They refer to this as "adding"* the child "to the title".  For a variety of reasons, the parent later wants to "take it back".  That's when they find out that they can't just "take" this child "off" the title on their own.  If title is to be restored to the parent(s), the child must sign a deed back.  If the child agrees and does so, fine; I don't hear about those happy outcomes.  My phone rings when the child refuses.  Now I have to tell the unhappy parent how much it is going to cost to sue the child to get the property back, and how I cannot guaranty success (and how proper estate planning in the first instance would have avoided this).  It is a very ugly, expensive situation.  .
  • Why might the parent want/need the child to gift the property back?  Well, let's say the parent wants to sell the property and move elsewhere.  I had this very case in my office 2019-2020.  Mom gifted a joint tenancy interest to her daughter for estate planning purposes.  Later mom decided she wanted to sell the property and move elsewhere.  Daughter was perfectly willing to sign the deed on the condition that she (the daughter) receive half of the sale proceeds.  Daughter had contributed nothing to purchase of the property.  Daughter had made none of the mortgage payments.  Even worse, daughter lived with mother for a while and damaged the property and did not pay for the damage.  Outrageous!  This ended up in litigation.  Yes, maybe the deed only cost $350 (or less) to prepare and record, whereas a proper estate plan would have cost $3,500 or more, but the savings ended up being swamped by the cost of litigation.  When asked, I usually estimate $30,000 for these types of cases.  I need to raise my estimate.  That case cost approximately $24,000 to be resolved without a trial.  Had it gone to trial, it would have been way more.  Penny wise. Pound foolish.
  • Another reason might be the parent wants to refinance.  Guess what.  If you "added"* someone to your deed, that person's signature is now required to do anything with your property, including refinance.  What if you can't find him or her?  That has been known to happen.  What if he or she is uncooperative or wants a piece of the action (having contributed absolutely nothing?  See bullet point immediately above.
  • Another reason might be you are reading this blog for some time now and understand that trust-based estate planning is the more desirable way to go, for everyone involved.  You want the other person to deed the property back to you so you can do proper estate planning.  He or she refuses, suspicious that you plan to disinherit him or her (maybe you do, maybe you don't).  The fact of the matter it's not all YOUR property to plan for anymore. You are going to have to find a way to undo the transfer before you can do proper estate planning, and that might require expensive litigation.  If you haven't made this mistake already, don't!  Talk to us about how to do it right. 


  • But wait, there's more!  Adding* people to your real property title exposes your real property to THEIR creditors.  In other words, if your child is sued and a judgement is entered against him or her and recorded in the local County Recorder's office or Register of Deeds office, that judgement becomes a lien on YOUR property.  The judgement must be paid before you can sell or refinance the property, and that's if the judgement creditor doesn't decide to go ahead and foreclose his or her lien, in which case you will end up having to pay your child's debt in order to protect your property.  Do you have that kind of money?  It is kind of a blank check because there is no way to know ahead of time what financial problems your child might encounter in the future.  For sure don't do this if your child already has judgements against him or her; they will attach as soon as the deed is recorded.
  • But wait, there's more!  What if your child is married when you "added"* him or her to your deed?  Did you mean for his or her spouse to acquire an interest?  Don't be surprised if the spouse ends up being a co-owner with you in a later divorce.  Talk about awkward.


  • And exactly how did you go about "adding"* your child to the deed?  Did you add him or her as a joint tenant with right of survivorship?  Or did you add him or her as a tenant in common? These things matter but a lot of people when doing DIY estate planning don't think these things through.  Let's say you just added his or her name without specifying the form of ownership.  In most states this creates what is presumed to be a tenancy in common.  If you added, say, two names as co-owners along with you, then the law also presumes that each now owns one-third.  What happens if you die?  The answer is if you die in this example, your one-third interest will become part of your probate estate and will transfer either to your heirs at law or to the beneficiaries named in your will if you have one.  The other two-thirds interest will continue to be owned by those two other individuals on the deed.  Is that the outcome you had in mind?
  • What happens in the previous example if one of them dies?  Well, his or her interest will pass to HIS OR HER HEIRS at law or beneficiaries under his or her will if he or she has one?  Is that what you had in mind, i.e. to become a co-owner along with your child's spouse?  Or maybe the child's spouse and children?  Imagine how much more difficult it is becoming to sell or refinance.


  • Under most state laws, when two or more people own "joint" bank accounts, each of them has the right to the entire account, no matter whose money is actually in the account. Sometimes joint owners or their agents can disagree about the use of funds in the accounts. When that happens, the party who makes it to the bank first often wins.  This "disagreement" might be something as simple as the joint owner's desire to line his or her own pockets with your money.


  • Now let's say you added* two other individuals to your deed along with you as joint tenants with right of survivorship (and let's assume you did THAT the right way in accordance with the laws of your state, in accordance with however many "unities" are required in your state).  Did you intend that if you die, then one of them dies, that the last one left standing becomes the sole owner, thereby disinheriting the children of the deceased child (your grandchildren)?  Just saying, that's what could happen.
  • Let's say the other owners predecease you, followed in quick succession by you.  As the last surviving joint tenant with right of survivorship, the property would land in your estate.  But you had engaged in DIY estate planning, so you had no will, so the property passes through a probate to your heirs at law.  If you were engaging in DIY estate planning, that would be a fail.  And if you wanted the property to go to specific people and their heirs, and not your intestate heirs, that would be a fail too.  Don't think it doesn't happen.  I have seen this exact scenario only it was one child added to the deed, not two.


  • But wait, there's more!  You had heard that the way to plan ahead to pay for nursing home expenses was to give your property away.  You vaguely remember something about five years but weren't worried about it at the time.  It has only been two years since you made the gift and you need to go into the nursing home now.  Medicaid is going to impose a lengthy penalty period against you because of that gift, and the cost to private pay during that penalty period is more than the value of the property you gifted and, even worse, the giftee won't give it back in order to "cure" the gift, nor is he or she willing to kick in to pay for your nursing home care.  Ugly, ugly situation, and it happens.


  • But wait, there's more!  More than five years have elapsed since you made that gift.  Yay!  But in the meantime, the giftee has come to the full realization that he or she IS the sole owner of the property and demands that you pay rent (to stay in your own home!!).  You have no choice but to comply because you do not have the means to move.  Don't think that won't happen.  I have seen it.  Ugly, ugly situation, and it happens.

*I used the phraseology "putting" or "adding" a name "on the deed" because that is how the DIYers talk about it.  It is not how attorneys talk about it. We describe what happened as the individual "retitled" the real estate or "conveyed" a joint tenancy interest" or words like that.

That's FOURTEEN reasons not to do this, and those are just the ones I could think of the day I sat down to compose this blog.  I will probably think of more reasons tomorrow.

The bottom line is, you CAN have your cake and eat it too, if you do your estate planning the RIGHT way.  Hire a professional.  We have ways of ensuring you remain in control of your property during your lifetime, and still qualify for Medicaid, and avoid probate, and ensure that your property goes to the people you want to inherit.  Talk to us!  The cost of proper estate planning is, admittedly, more than DIY estate planning, but the benefits are far and away greater, and the risks are far and away fewer, too.


About the Author

Nina Whitehurst

Attorney at Law Nina has been practicing law for over 30 years in the areas of estate planning, real estate and business law She is currently licensed in Alaska, Arizona, California, Colorado, Oregon and Tennessee. Her Martindale-Hubbell attorney rating is the highest achievable: 5 stars in peer...


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