One way of avoiding probate - is it a good idea?

Elderly parents sometimes add their children’s names to the title of their primary residence or investment accounts. This strategy has advantages, such as bypassing probate and reducing probate fees. As a general guideline, for every $1 million in value, approximately $14,000 can be saved on probate fees. However, it’s essential to note that this approach only applies to the principal residence, not other properties. For instance, if you add your children to the title of a cottage, it could trigger property transfer tax, which is not advisable.

When adding children to your property or investments, there are a few downsides to consider.

1. Loss of Control: By adding someone to the title, you relinquish sole control. For instance, selling the house would require agreement from all joint owners.
2. Legal Exposure: Jointly owned assets can be exposed to litigation if any owner experiences a marriage breakup or legal issues.

We typically recommend joint ownership for estate planning in the following scenarios:

1. Elderly Parents: Particularly when parents are in their late 80s or 90s.
2. Failing Health: If parents are experiencing health issues.

However, if both parents are alive and well, adding children to the title is not advised.

While reducing or eliminating probate and probate fees is important, avoid hasty decisions. Thoughtful planning is crucial.

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Please note, we are not tax advisors and nothing mentioned in this newsletter may be interpreted as advice specific to any one individual. For recommendations that pertain to your specific situation, consult a tax advisor or financial advisor.