In the world of estate planning and probate, avoiding costly mistakes is crucial. In a recent interview, estate planning attorney Darrell Harriman shared valuable insights on this topic. Harriman, an expert in estate planning, probate, and trust administration, shed light on various misconceptions and pitfalls that individuals often encounter in their estate planning journeys.
Understanding the Pitfalls of Putting Children on Title
One common misconception Harriman highlighted is the decision some individuals make to put their children on the title of their property before passing away, thinking it will avoid probate. Harriman emphasized one flaw in this approach. The issue lies in the concept of stepped-up basis. If a property is transferred during one’s lifetime, the capital gain tax is measured from the original purchase price. However, if it’s transferred after death, the tax is measured from the property’s value at the date of death. This significant difference can lead to substantial tax savings for the heirs, making expert estate planning advice invaluable.
The Importance of Properly Funding a Living Trust
Harriman emphasized the significance of properly funding a living trust. Creating a trust is one thing, but assets need to be transferred into it. Real property transfers are usually performed by the attorney who drafts the estate plan, but transfer of other assets like bank accounts and stocks must usually be done by the client. Additionally, ensuring new assets are titled in the trust’s name when acquired is vital. Harriman stressed that a well-funded trust is the key to avoiding probate effectively.
Navigating Life Changes: Marriage, Divorce, and Disinheritance
Life changes, such as marriage and divorce, can complicate estate planning. Harriman highlighted the importance of updating estate plans after such events. Failing to do so might result in unintended beneficiaries. Additionally, he discussed delicate situations where individuals wish to disinherit a particular heir. Harriman suggested open communication with the disinherited party or leaving a sealed letter explaining the decision, ensuring transparency and potentially avoiding future legal battles.
Charitable Giving and Estate Planning
In cases involving charitable giving, Harriman advised caution. He recommended specifying the exact charity name and its headquarters’ address in the estate planning documents to prevent ambiguity. While giving to charity is noble, understanding the tax implications and seeking advice from tax specialists is essential, especially for larger estates.
Conclusion
As individuals navigate their own paths toward securing their legacies, Harriman’s wisdom echoes: seek professional guidance, communicate openly, and plan meticulously. In these actions, one finds the key to ensuring that their assets are protected, their intentions are clear, and their legacy is preserved for generations to come. In the world of estate planning, Darrell Harriman’s insights serve as a guiding star, illuminating the way for a future where legacies are not only secure but thriving, ensuring a lasting impact on the generations that follow.
🗣️Notable Quotes:
“The reason why it’s almost universally a bad idea to put your children on title is a thing called stepped-up basis. If people understand the idea of what a capital gains tax is… if you transfer it to your children during your lifetime, your children have your same tax basis. So you transfer it to them, and then they hold on to it for another 20 or 30 years. When they sell it, your capital gain, or their capital gain, they’re going to look way back to what the parents paid for it… So the tax savings to their children by receiving it or having it transferred to them after death, the tax savings many times are hundreds of thousands of dollars.”
Watch The Full Interview Now:
Connecting with Darrell:
LinkedIn: https://www.linkedin.com/in/darrell-harriman-4b478118/
Facebook: https://www.facebook.com/HarrimanLaw/
Website: http://www.harrimanlaw.com
DISCLAIMER: The Probate Realtor® Matias Baker Masucci is a licensed real estate broker in California DRE # 02054763. Any legal information provided is for informational purposes only and NOT for the purpose of providing legal advice. Contact an attorney to obtain advice with respect to any particular legal issue or problem. We make no guarantees as to the accuracy of any information.
