How Can Easy Estate Planning Cause Issues?

Lazy estate planning
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Easy is not always better, especially when it comes to estate planning.

Life is full of choices.

Many factors guide the decisions we make moment by moment when presented with options.

The simplest choice is often appealing.

According to a recent Florida Today article titled “Estate planning: When you take the lazy way out, someone will pay the price,” you should resist the lure of easy estate planning.

Lazy estate planning will cause problems for your loved ones.
Resist the urge to settle for lady estate planning.


What seems simple to you often causes complications for your loved ones when you die.

Many people believe simply adding the names of their children as joint owners to assets will be a sufficient estate plan.

By adding a child to your home title, your brokerage account, or bank account, you will essentially be gifting your child an ownership interest in these assets while you are alive.

This is a problem if that child faces a separation or divorce, a lawsuit, or a bankruptcy.

Your gifted asset is now in play.

If you are married, is the asset valued at more than $30,000 or does the account hold more than $30,000?

If you are singe, is the asset valued at more than $15,000 or does the account hold more than $15,000?

If yes, you will need to file a gift tax return even if no give tax is due.

Failing to file this gift tax return could require you to owe a gift tax in the future.

Another problem with simply adding your child to your title or brokerage account as your estate planning strategy is the carryover basis.

At this time, federal law allows for a step-up in basis for appreciated assets when the owner dies.

This means the asset will be revalued at the date of death for the owner for basis purposes.

The heir and the estate will not owe capital gains taxes on the appreciation in value.

If you simply add your child to the title of your home or your brokerage account, your child will be required to pay capital gains taxes owhen he or she chooses to sell it after you die.


How can you avoid leaving this mess for your adult child?

One option is to make your adult child a Transfer on Death or a Payable on Death beneficiary for your account.

Although this would solve the issue of the step-up in basis, it may leave you vulnerable in incapacity.

Unless he or she has been appointed as an attorney in fact under your general durable power of attorney, your child would not be able to pay your bills or manage your finances if you were incapacitated.

The best option is to work with an experienced estate planning attorney.

Your attorney will be able to create an estate plan to satisfy incapacity planning and tax planning needs.

ReferenceFlorida Today (May 20, 2021) , “Estate planning: When you take the lazy way out, someone will pay the price”

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