Estate Planning Key #2 Avoid Major Tax TrapsEd Olkovich
Do you know the biggest tax mistake you can make? Neither did Karl, a 72-year-old mechanic who was set to undergo open-heart surgery.
Karl told his lawyer to register his children as joint owners on the title to his condo.
“Was this the best thing to do?” he asked his lawyer after the operation.
What do you think? I’ll give you my answer in a moment.
Don’t Jump into Joint Ownership
People read a newspaper article or talk to someone in a bank about how to avoid probate and suddenly …
They’re on their lawyer’s doorstep, insisting that their property be transferred into joint ownership with their children.
Everyone Wants to Avoid Probate
Don’t jump on this bandwagon. Probate taxes are not the biggest tax problem for which you need advice.
Are you thinking of putting your child on the title to your home?
You should not transfer property into joint ownership, even with your children, without independent legal advice. Click to tweet this.
This means getting advice from your own lawyer, not your children’s lawyers.
You should be aware of the many dangers of joint ownership. Using joint ownership as a way to avoid probate taxes can mean you lose control over your property.
Joint Ownership Dangers
Even joint ownership will not prevent bitter and costly legal battles among your children.
Like Karl, you may be disappointed to learn that a child’s creditors can also lay claim to jointly owned assets.
The last thing you want to do is to buy back your own property from your child’s creditor or partner.
The biggest issue with joint ownership is the income tax problems. These can crop up when you transfer property that is subject to capital gains tax (Read: your cottage, or rental properties).
Most people take a piecemeal approach to estate planning. But you need to see the big picture. Consider the income tax consequences when you transfer assets into joint ownership.
There are some easy tax-saving moves you can make to reduce your tax bills. Discover the other dangers of joint ownership that start with the letter “D” in Estate to the Heart.
How Do You Reduce Income Taxes?
Taxes are always confusing.
Tax laws change daily. How are you going to stay on top of all this? You must rely on professionals to give you proper advice.
Paying taxes can eat up your estate’s assets and destroy your dreams. You can, however, plan now to give those you love more and the government less.
Let’s talk about wills next.
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Edward Olkovich (BA, LLB, TEP, C.S.) is a nationally recognized author and estate expert. He is a Toronto estate lawyer and Certified Specialist in Estates and Trusts. Edward has practiced law since 1978 and is the author of seven books. Visit his website, mrwills.com, for more free valuable information.
© Edward Olkovich 2012