By: Samantha K. Wolfe, Esquire, LL.M. in Taxation
One of my favorite toys growing up was a talking Mother Goose. She had a tape cassette player hidden under her one wing. When I would insert a tape into the player Mother Goose would read me a story. I would follow along in the book while she read to me. I love when someone reads to me, so I loved Mother Goose. I received Mother Goose as a gift for my sixth birthday. My younger sister’s birthday is the same month as mine, so we usually have a shared birthday party. My younger sister received Teddy Ruxpin the same day I received Mother Goose, at her fourth birthday party. Because I thought Mother Goose was such a great gift, I offered to share Mother Goose with my younger sister if she shared Teddy Ruxpin. My thought was that we could maximize our reading fun if we shared gifts.
Thankfully for me my younger sister didn’t want to listen to Mother Goose read her stories very often; she preferred good ole Teddy. But there was that one time that my younger sister decided her story would sound better coming from Mother Goose’s beak. I recognize that she probably didn’t mean to hurt poor Mother Goose but to this day I remember the devastation when I realized that she had carried Mother Goose around by her neck. Since my sister was used to handling Teddy, she didn’t realize that Mother Goose was never to be carried around by holding only her neck. She had no idea she was wrecking Mother Goose’s reading capabilities. Mother Goose never worked after that day.
It was hard to be mad at my sister because she was as equally distraught as I was when Mother Goose didn’t read any more stories; after all, Mother Goose was half her toy too. I learned my lesson about shared toys, and whenever clients ask me if I think they should add their children’s name to the title of an asset I think about Mother Goose and her broken neck.
Occasionally clients come into the appointment with the thought that titling real estate or any other property in both their names and a child’s name would be a simple way to accomplish transferring ownership to the next generation. The thought is that adding the child’s name will mean that the asset will not need to be probated and the tax burden will be minimal when the clients pass away. Similarly, I thought sharing two toys would be a great idea, but I didn’t foresee that my younger sister, one of the joint owners, would make a mistake that cost me my treasured Mother Goose.
Adding a child’s name to ownership of property opens up each owner to the mistakes of the other owners. For example, if a father owns a family farm and wants to ensure that the farm is given to his oldest son who actively works on the farm currently, the father may decide to add his son’s name to the deed and makes his son a joint owner of the property. What the father may not realize is that by adding his son’s name to the title of the farm he is exposing the farm to the son’s creditors. Depending on the actual titling of the asset, if the son is sued, the creditor may be able to seek judgment against the jointly owned property.
Anytime you are considering adding another individual’s name to the title of the asset remember Mother Goose and consider what you are risking and whether the reward is worth a beloved toy with a broken neck. In many cases there are other ways to transfer the asset to future generations without risking the actual asset. I recommend consulting a professional legal advisor anytime you are titling assets to learn all the options. Sometimes people wait too long before they consult their legal advisor. Some people wait until they are actually in the crisis situation. I recommend that you consult your legal advisor prior to the occurrence of a disaster, so that you can select the best option to transfer ownership and protect assets. Do not wait to long to discuss your planning options. There are always more options planning-wise when you plan prior to actual situation when the planning is needed. Check out my sump pump story next to understand the importance of planning for a disaster.