Is Adding Your Child to Your Title a Bad Idea?

00:50:21
https://www.youtube.com/watch?v=Jj8bgoNmpnE

Resumo

TLDRJim Cunningham advises against adding your child to your house title despite its apparent benefits, such as avoiding probate and simplifying inheritance. Doing so transfers a portion of ownership, which can lead to loss of control over the property. Risks include exposure to child’s creditors, potential forced sales due to bankruptcy, family disputes, negative tax implications, and complicated gift tax requirements. Instead, legal and financial experts often recommend trusts as a safer alternative for transferring property, as they can protect against these risks and ensure more control over the asset. Trusts prevent the need for probate, preserve privacy, and maintain fair distribution among heirs. Cunningham stresses that expert legal advice is essential when navigating these complex estate matters.

Conclusões

  • 🏠 Adding a child to the house title can seem beneficial but poses risks.
  • ⚖️ Legal advice is crucial in estate planning and property transfers.
  • 📜 Trusts are safer alternatives for property transfer than simply changing the title.
  • 💰 Capital gains tax implications can be severe if titles are shared or transferred improperly.
  • 🛡️ Trusts provide protection from creditors and can help in maintaining control.
  • 💔 Family conflicts can arise from unequal property distribution.
  • 💡 Important to understand the implications of partition actions and forced sales.
  • 💼 Property co-ownership can complicate decision-making and financial responsibilities.
  • 🔍 California has stringent probate laws which can be bypassed with smart planning.
  • 📈 Applicable federal rates must be considered in family loans to avoid tax issues.

Linha do tempo

  • 00:00:00 - 00:05:00

    Jim Cunningham introduces the video discussing why adding your child to your house title might not be a good idea, highlighting potential risks and control issues.

  • 00:05:00 - 00:10:00

    Jim elaborates on various legal ways to transfer home ownership to children and warns about California's trust-friendly but probate-averse laws, focusing on trusts over wills.

  • 00:10:00 - 00:15:00

    He presents risks of adding a child to a home title such as loss of control, bankruptcy risks, exposure to creditors, and potential family conflicts.

  • 00:15:00 - 00:20:00

    Jim discusses tax implications such as negative capital gains consequences and gift tax responsibilities when transferring home title to children.

  • 00:20:00 - 00:25:00

    Partition action risks are elaborated, where added children could force a house sale, leading to family conflict and financial complications.

  • 00:25:00 - 00:30:00

    Jim explains enhanced statutory protections now available in California against involuntary properties sales due to heirs or debts resulting from co-ownership.

  • 00:30:00 - 00:35:00

    Capital gains tax calculations on property transfers to children are explained, showing tax pitfalls of early gifting versus inheritance through a trust.

  • 00:35:00 - 00:40:00

    Jim outlines potential family disputes from unequal advancements on inheritance and stresses the importance of fair planning in estate distribution.

  • 00:40:00 - 00:45:00

    He covers alternative ways of helping children acquire property, including loans, living trusts, and considerations for fair gifting to maintain family harmony.

  • 00:45:00 - 00:50:21

    Finally, Jim concludes with a reminder of the value of professional legal advice in estate planning, offering services from Cunningham Legal and promoting upcoming webinars.

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Vídeo de perguntas e respostas

  • What are the risks of adding a child to the title of your home?

    Adding a child to the title can lead to loss of control over the property, exposure to the child's creditors, potential forced sales, and family conflicts.

  • How can adding a child to the title impact capital gains taxes?

    It can lead to negative capital gains tax consequences, as the child's cost basis remains the same as the parent's, potentially resulting in a taxable gain if the property is sold.

  • What is a partition action?

    A partition action is a legal process where a co-owner requests the court to divide or sell a property, which can lead to forced sales and family disputes.

  • Why is probate problematic in California?

    Probate in California is lengthy, costly, and lacks privacy, as all estate details become public record.

  • Are there safer alternatives to adding a child to your house title?

    Yes, creating a trust or using a living trust can safely transfer the property to children and avoid many issues related to taxes and creditors.

  • How can trusts protect your home from future risks?

    Trusts can protect assets from creditors, divorce settlements, and ensure controlled distribution according to your wishes.

  • Is there a way to ensure equal distribution among children when adding them to property titles?

    Yes, outlining the intentions clearly in a will or a trust and considering advance inheritance agreements can help maintain fairness.

  • What is the significance of the applicable federal rates in family loans?

    These rates determine the minimum interest that must be charged on family loans to prevent them from being considered gifts for tax purposes.

  • Can an LLC be used to hold property ownership effectively?

    Yes, holding property in an LLC can offer additional liability protection and ease of management, but requires careful legal setup.

  • What are the potential complications of co-ownership in property?

    Co-ownership can lead to shared decision-making, potential for disagreements, and exposure to the other owner's financial issues.

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  • 00:00:00
    hi this is Jim Cunningham why shouldn't
  • 00:00:02
    you add your child to your title to your
  • 00:00:04
    house now that sounds like a good idea
  • 00:00:07
    maybe I can just add my kid to the title
  • 00:00:09
    maybe that'll solve a lot of problems
  • 00:00:10
    we're going to talk about why that may
  • 00:00:12
    not be such a good idea and a lot of the
  • 00:00:14
    stuff that can go wrong because really I
  • 00:00:16
    think on a high level this seems kind of
  • 00:00:17
    kind of easy right like oh I'll just add
  • 00:00:19
    Johnny to the title that'll take care of
  • 00:00:22
    a lot of things uh but really is you're
  • 00:00:23
    going to see it can create a lot of risk
  • 00:00:26
    and a lot of potential problems and of
  • 00:00:28
    course lawyers are in the in the
  • 00:00:29
    business of kind of warning people of
  • 00:00:31
    all the stuff that can go bad and taking
  • 00:00:33
    the right path to minimize that future
  • 00:00:35
    risk
  • 00:00:38
    [Music]
  • 00:00:48
    so there are many many ways to and what
  • 00:00:51
    we're talking about here specifically is
  • 00:00:52
    transferring your home what you're live
  • 00:00:54
    in which you know everyone most of our
  • 00:00:56
    clients own their home right so you're
  • 00:00:58
    living in your house and you say look I
  • 00:00:59
    want my children to inherit this I want
  • 00:01:01
    to to put them on title and make it easy
  • 00:01:03
    so we don't have to waste money on
  • 00:01:04
    lawyers I totally get that law lawyers
  • 00:01:06
    are very expensive uh there are several
  • 00:01:08
    ways to do it and several ways not to do
  • 00:01:11
    it so you can we're going to talk about
  • 00:01:13
    gifting we're going to talk about
  • 00:01:15
    titling we're going to talk about use of
  • 00:01:16
    wills and trusts we'll probably lean
  • 00:01:18
    more on the trusts uh we're in
  • 00:01:20
    California and California is uh really
  • 00:01:22
    supportive of trusts and kind of
  • 00:01:24
    punitive when it comes to wills and
  • 00:01:25
    probate and we're going to talk about uh
  • 00:01:28
    uh ways to protect your home when it
  • 00:01:31
    goes to your child your son or your
  • 00:01:33
    daughter protecting it from future
  • 00:01:35
    ex-son-in-law and future
  • 00:01:36
    ex-daughter-in-law so I have children
  • 00:01:38
    and I know I'm concerned about that so
  • 00:01:40
    I'm Jim Cunningham I'm at a partner at
  • 00:01:42
    Cunningham legal I've been an attorney
  • 00:01:43
    for 30 years uh just uh just slightly
  • 00:01:46
    over 30 years we have offices throughout
  • 00:01:48
    the state of California I'm a certified
  • 00:01:49
    specialist in a state planning trust
  • 00:01:51
    appropiate law Securities Insurance
  • 00:01:52
    licensed and a pilot single engine land
  • 00:01:55
    these are currently the lawyers in our
  • 00:01:56
    Law Firm we are devoted to All Things
  • 00:01:58
    wealth peaceful trans of wealth between
  • 00:02:00
    one generation to the next involving
  • 00:02:02
    family businesses real estate uh trusts
  • 00:02:05
    estate planning uh disclaimer is very
  • 00:02:07
    important I'm a lawyer I'm talking words
  • 00:02:09
    are coming out of my mouth uh I am not I
  • 00:02:12
    not giving you legal advice okay so this
  • 00:02:14
    is not a do-it-yourself project what
  • 00:02:16
    we're talking about here requires uh
  • 00:02:18
    frankly a a a great lawyer a Savvy
  • 00:02:21
    lawyer alongside with you to get to uh
  • 00:02:24
    the goal that you would like to be in
  • 00:02:26
    terms of transferring your wealth in
  • 00:02:28
    your home so why shouldn't you add your
  • 00:02:31
    child uh to your title to your home and
  • 00:02:35
    this is a very common actually Google
  • 00:02:37
    search term is you know why how do I add
  • 00:02:41
    my child to to my title how do I do that
  • 00:02:43
    and really there's a question of why why
  • 00:02:45
    you want to do that but here are some
  • 00:02:46
    risks so this is why you should not add
  • 00:02:49
    a child to the title of your home when
  • 00:02:51
    you make a transfer of uh you know
  • 00:02:53
    either it's your whole home or part of
  • 00:02:55
    your home maybe I'll I'll put them on as
  • 00:02:56
    a joint tenant or him or her as a joint
  • 00:02:58
    tenant that is primarily a loss of
  • 00:03:01
    control because that person that you add
  • 00:03:03
    to your title is a present owner of that
  • 00:03:05
    property and you the control that you
  • 00:03:08
    did have that 100% control that you did
  • 00:03:10
    have now you don't have 100% control so
  • 00:03:12
    if you add them to your title a portion
  • 00:03:14
    of control is going over to them you no
  • 00:03:16
    longer have 100% now it's sort of shared
  • 00:03:19
    uh you have to you have to make
  • 00:03:21
    decisions jointly and you say well
  • 00:03:22
    that's not bad you know I trust my child
  • 00:03:24
    they're responsible uh are they you know
  • 00:03:26
    are they married what what sort of U
  • 00:03:29
    trouble can they get into creditor
  • 00:03:30
    exposure what we're talking about here a
  • 00:03:32
    lot of times is bankruptcy the leading
  • 00:03:34
    cause of of bankruptcy is health care
  • 00:03:37
    and so what that means is people get
  • 00:03:38
    sick and they can't afford uh the the
  • 00:03:40
    cost of their care and they run up a
  • 00:03:42
    huge medical debt and I I guarantee
  • 00:03:44
    everyone on this knows someone who's run
  • 00:03:46
    up medical debt it's just a fact of of
  • 00:03:48
    being an American unfortunately as we
  • 00:03:50
    know people and if that's you I'm I'm
  • 00:03:51
    sorry to hear that that is the leading
  • 00:03:53
    cause of bankruptcy is Healthcare uh
  • 00:03:55
    family conflict you know if you have two
  • 00:03:57
    children and you put one child on the
  • 00:03:58
    title to your home how's that other
  • 00:04:00
    child going to feel right so if if
  • 00:04:02
    Johnny got the red bike for Christmas
  • 00:04:04
    decades ago and is still mad uh that's
  • 00:04:06
    going to be a problem and um you know
  • 00:04:09
    you might say well it's easy I'll just
  • 00:04:10
    add two kids to to the title well that
  • 00:04:12
    may double your your risk um risk of
  • 00:04:14
    loss of the property this is very
  • 00:04:16
    important because if that child that you
  • 00:04:18
    add to title goes into bankruptcy the
  • 00:04:20
    bankruptcy trustee so what happens when
  • 00:04:22
    you when you when you declare bankruptcy
  • 00:04:24
    personal bankruptcy you no longer have
  • 00:04:26
    control over your asset so if you've
  • 00:04:28
    added your child to that title the
  • 00:04:31
    bankruptcy trustee can force a sale
  • 00:04:33
    right and then you then that house is
  • 00:04:36
    sold and that money is going to go to
  • 00:04:38
    your your child's creditors so big big
  • 00:04:40
    problem um and that's why you would want
  • 00:04:43
    to think twice about adding your child
  • 00:04:44
    to the title a negative capital gains
  • 00:04:47
    tax consequences we'll have an example
  • 00:04:48
    here where you add a child as a joint
  • 00:04:50
    tenant uh that means that the capital
  • 00:04:53
    gains tax that you could otherwise avoid
  • 00:04:55
    or your child could otherwise avoid when
  • 00:04:57
    you pass away you don't get that with
  • 00:04:59
    joint t you don't get that full benefit
  • 00:05:01
    we'll talk about that and then also gift
  • 00:05:02
    tax consequences if you have a property
  • 00:05:05
    and you you you create a deed
  • 00:05:08
    transferring that property to you and
  • 00:05:09
    your child you have just made a gift to
  • 00:05:12
    your child okay so that means you got to
  • 00:05:14
    file a gift tax return probably don't
  • 00:05:17
    have to pay gift taxes but it depends on
  • 00:05:18
    how much you've given you know if you've
  • 00:05:20
    given a substantial amount during your
  • 00:05:21
    lifetime and as we do this currently the
  • 00:05:23
    current the gift tax exemption is about
  • 00:05:27
    13.61% in 2025
  • 00:05:30
    very important to understand that um you
  • 00:05:33
    know if you make that gift it is a
  • 00:05:34
    reportable gift whether taxes do or not
  • 00:05:36
    you still have to report that and a lot
  • 00:05:38
    of people don't don't realize that so
  • 00:05:40
    loss of control um this what I'm talking
  • 00:05:43
    about here is a forced sale it's also
  • 00:05:45
    called A Part partition action so uh
  • 00:05:48
    when property is used as uh when
  • 00:05:51
    somebody owns property and then they
  • 00:05:52
    have a creditor somebody who sues them
  • 00:05:55
    and they want to recover money that they
  • 00:05:56
    borrowed let's say they ran up a credit
  • 00:05:58
    card right and they don't pay that
  • 00:06:00
    credit card and that that judgment
  • 00:06:03
    creditor can seize the assets of the
  • 00:06:05
    debtor so if your child you add your
  • 00:06:06
    child on title and your child runs up a
  • 00:06:09
    bunch of credit card debt and that
  • 00:06:10
    credit card company successfully sues
  • 00:06:11
    the child they're going to go after your
  • 00:06:14
    house right that you're you put your
  • 00:06:16
    your son or daughter on on the title and
  • 00:06:18
    they're going to seek a sale of that
  • 00:06:20
    house to be paid and that's going to
  • 00:06:22
    create a big problem a shared
  • 00:06:23
    decision-making this is important so
  • 00:06:25
    once your child's added to title they
  • 00:06:28
    become a co-owner and this has to do
  • 00:06:30
    with sales refinances and the nature of
  • 00:06:32
    of California real estate is if you add
  • 00:06:35
    someone as a 10% owner they are 10 a 10%
  • 00:06:38
    owner of the whole thing so they have a
  • 00:06:40
    fractional interest so if you have a 10
  • 00:06:42
    acre parcel and you give them 10% and
  • 00:06:44
    you're trying to just give them that one
  • 00:06:45
    acre you can't really do that okay you
  • 00:06:48
    would have to you would have to take a
  • 00:06:49
    lot of extra steps so very important to
  • 00:06:52
    understand this shared decision making
  • 00:06:55
    um can cause a lot of problems if people
  • 00:06:57
    don't agree now again you may say well
  • 00:06:58
    gee we agree it's no problem but what if
  • 00:07:01
    your child passes away and now you're
  • 00:07:03
    dealing with a an a son or
  • 00:07:06
    daughter-in-law or maybe some grandkids
  • 00:07:08
    or some other people depending on what
  • 00:07:09
    your child's will has so it's a very um
  • 00:07:13
    it it's it's hard to control your
  • 00:07:15
    property when you add somebody to title
  • 00:07:17
    no asset protection as a co-owner the
  • 00:07:19
    child's share of that property can be
  • 00:07:21
    subject to claims by creditors and
  • 00:07:23
    divorce and that's a big one now you may
  • 00:07:25
    say well you know Jim I've watched your
  • 00:07:28
    other videos and if you you make a gift
  • 00:07:30
    of property during marriage that is
  • 00:07:32
    separate property well that's true so if
  • 00:07:33
    you make a gift to your daughter and
  • 00:07:35
    that's a separate property gift that is
  • 00:07:38
    your daughter's gift well if your
  • 00:07:39
    daughter transmutes that property and
  • 00:07:41
    says to her spouse well honey you know I
  • 00:07:43
    love you so much this you know this half
  • 00:07:45
    of the house that my my parent gave me I
  • 00:07:47
    want to share that and that should be
  • 00:07:48
    community property that may then become
  • 00:07:50
    community property so it's property that
  • 00:07:53
    you acquire by gift if you're married
  • 00:07:55
    does not always stay separate property
  • 00:07:57
    it can uh become can easily slide into
  • 00:08:00
    community property the family conflict
  • 00:08:02
    and stress I mean obviously everything
  • 00:08:04
    we've talked about here could cause a
  • 00:08:06
    lot of family conflict and stress and I
  • 00:08:07
    think we all want to avoid that so if
  • 00:08:09
    you're watching this on YouTube I've got
  • 00:08:11
    a a still here from The Brady Bunch
  • 00:08:13
    which I grew up watching as a kid and I
  • 00:08:15
    distinctly remember this episode because
  • 00:08:16
    I didn't have any siblings so you've got
  • 00:08:18
    two brothers who have decided to divide
  • 00:08:20
    up their room and they put down a piece
  • 00:08:22
    of tape between the room that is a
  • 00:08:24
    partition so a partition action is hey
  • 00:08:26
    you stay on this side I'll stay on that
  • 00:08:28
    side that's kind of what's going on here
  • 00:08:30
    but what happens in the real world a
  • 00:08:32
    partition action either separates the
  • 00:08:35
    parcel into two Parcels now if you have
  • 00:08:37
    a section of property which is 640 acres
  • 00:08:39
    that's kind of easy each person gets 320
  • 00:08:41
    Acres now assuming they're equal right
  • 00:08:44
    in in value and and desirability uh
  • 00:08:46
    let's say they're just flat egg Acres
  • 00:08:48
    okay maybe you can divide those up uh
  • 00:08:50
    easily but you know if you have a condo
  • 00:08:52
    or a house you can't really partition a
  • 00:08:54
    house so this is in the situation where
  • 00:08:56
    you add a child to the house things turn
  • 00:08:58
    South things go sour and uh that child
  • 00:09:02
    wants to sell the home and get their
  • 00:09:03
    money and we've seen this happen in re
  • 00:09:05
    in real world with clients of ours where
  • 00:09:08
    they they put added their kids to title
  • 00:09:09
    without us you know kind of before they
  • 00:09:12
    came to us they've added their child to
  • 00:09:13
    title and now that child is Seeking a
  • 00:09:15
    sale of the property which I you know
  • 00:09:17
    it's hard for me to believe someone
  • 00:09:18
    would do that to their parent um but
  • 00:09:20
    there are recent changes in the law to
  • 00:09:21
    protect uh co-owners particularly years
  • 00:09:24
    these are statutes that were passed in
  • 00:09:25
    the last couple of years and really the
  • 00:09:27
    focus is on a fair process and Pro
  • 00:09:29
    prevention of involuntary loss because
  • 00:09:31
    this is really trying these these
  • 00:09:32
    statutes are trying to solve a problem
  • 00:09:34
    that arose when somebody maybe added a
  • 00:09:36
    child to the title and then the child
  • 00:09:38
    forced a sale of the property which is
  • 00:09:40
    called a partition action but really you
  • 00:09:42
    can think of it as a sale action because
  • 00:09:44
    the idea is not to split the property
  • 00:09:46
    into two halves if you will it it is to
  • 00:09:49
    sell the property and for the child to
  • 00:09:51
    get the money so we have two acts one is
  • 00:09:53
    the uniform uh partition of airs
  • 00:09:55
    property act that was effective January
  • 00:09:56
    1 2022 this defines airs uh property so
  • 00:10:00
    this is in the situation where somebody
  • 00:10:02
    passes away and maybe three kids inherit
  • 00:10:05
    the property and two want to keep it and
  • 00:10:07
    one wants to sell it uh what do you do
  • 00:10:10
    uh it this now requires a fair market
  • 00:10:12
    appraisal and provides a first right of
  • 00:10:14
    refusal for the other co-owners so it
  • 00:10:17
    used to be that if heirs Inherited
  • 00:10:19
    property uh that uh they the one
  • 00:10:22
    disgruntled air could go in and force a
  • 00:10:24
    sale and it would go to auction and the
  • 00:10:27
    other co-tenants or the other owners did
  • 00:10:29
    didn't have the any rights any bundle of
  • 00:10:31
    Rights well now they do so now in the
  • 00:10:33
    situation where you've got a property
  • 00:10:34
    that goes to three children and they own
  • 00:10:36
    that all together um then now now
  • 00:10:39
    there's more more protection for those
  • 00:10:40
    other children who might want to keep
  • 00:10:42
    the property so they have that first
  • 00:10:43
    right of refusal and then the partition
  • 00:10:45
    of real property Act was uh January 1
  • 00:10:47
    2023 this expanded the protections uh to
  • 00:10:50
    all tency and common properties not just
  • 00:10:52
    inherited properties and so this allows
  • 00:10:54
    the non-partitioning co-owners to buy
  • 00:10:56
    out the others and this encourages uh
  • 00:10:58
    partition and kind over sales again what
  • 00:11:01
    this in kind means is if you have that
  • 00:11:03
    640 acre parcel which is a square mile
  • 00:11:05
    of of land that's a little bit easier to
  • 00:11:07
    divide up into two 320 acre SE uh
  • 00:11:11
    Parcels than it is to divide a condo how
  • 00:11:13
    are you going to divide a condo what you
  • 00:11:14
    get that bedroom I get that bedroom that
  • 00:11:16
    doesn't even make sense um but this does
  • 00:11:18
    now expand those those heirs rights to
  • 00:11:20
    all co-tenants and this actually does
  • 00:11:23
    we're talking about not adding your
  • 00:11:24
    child as as a tenant or as a as a
  • 00:11:27
    co-owner but if you have added your
  • 00:11:30
    child as a co-owner right and something
  • 00:11:31
    has gone wrong you now have more
  • 00:11:33
    protection as a co-tenant so I would say
  • 00:11:35
    you have more te more protection in
  • 00:11:37
    court it does not stop the process but
  • 00:11:39
    it does give you a little bit more um
  • 00:11:41
    when you look at your bundle of Rights
  • 00:11:43
    it gives you a little bit more than than
  • 00:11:45
    you might have had before passage of
  • 00:11:47
    these two acts so um this is again
  • 00:11:49
    enhanced protection for co-owners these
  • 00:11:51
    two acts in 2022 and 2023 I will say
  • 00:11:54
    this does add a layer of complexity so a
  • 00:11:56
    lot of times uh California especially
  • 00:11:59
    past laws and rules and regulations as a
  • 00:12:02
    it's designed to protect people and
  • 00:12:04
    enhance people's well-being what happens
  • 00:12:07
    many times as we have added complexity
  • 00:12:08
    and frankly cost and if you're in
  • 00:12:10
    California you know exactly what I'm
  • 00:12:11
    talking about uh there are um the courts
  • 00:12:15
    can now consider sentimental
  • 00:12:16
    non-economic factors not just the
  • 00:12:18
    economic factors so again the context
  • 00:12:20
    we're talking about here is somebody uh
  • 00:12:22
    it co-owns property with a child and
  • 00:12:24
    that child wants to sell the property
  • 00:12:26
    and the parent used to have really have
  • 00:12:28
    not many rights and they might just have
  • 00:12:30
    to sell the property and lose their home
  • 00:12:32
    so um increased complexity okay creditor
  • 00:12:35
    exposure risk of leans on property if
  • 00:12:37
    the child incurs a debt and is unable to
  • 00:12:40
    pay them and this property is in the
  • 00:12:41
    child's own name the creditors can lean
  • 00:12:43
    the property place a lean on the
  • 00:12:44
    property uh or force a sale and leans
  • 00:12:47
    make the property frankly unsellable
  • 00:12:49
    until the lean is released so or to get
  • 00:12:51
    a a to get a mortgage or to refinance
  • 00:12:54
    your mortgage so if you want to sell
  • 00:12:56
    that property you've added a child as as
  • 00:12:58
    a um
  • 00:12:59
    as a co-tenant and now a few years later
  • 00:13:02
    you want to sell that property but the
  • 00:13:03
    child's creditor is placed a lean on the
  • 00:13:05
    property that lean Holder will have to
  • 00:13:06
    be paid before you're going to get your
  • 00:13:08
    money from the sale of the property so
  • 00:13:10
    inadvertent adding of you know these
  • 00:13:13
    sort of inadvertent unanticipated
  • 00:13:14
    consequences of adding a child to um to
  • 00:13:18
    title so uh you are going to feel
  • 00:13:21
    pressured to settle your child's debts
  • 00:13:23
    before uh you can protect your property
  • 00:13:25
    and when a lean is on the property it's
  • 00:13:27
    not necessarily on that just that
  • 00:13:29
    child's interest it's on the property
  • 00:13:31
    itself which may complicate things so
  • 00:13:33
    that you know if you if the relationship
  • 00:13:35
    is soured with the child uh you know you
  • 00:13:38
    may find that you're going to have to
  • 00:13:39
    pay that half and the child pays half if
  • 00:13:41
    you guys own it 50/50 it just depends on
  • 00:13:43
    how the math works out rather than all
  • 00:13:45
    of that debt being uh on the the side of
  • 00:13:48
    the child so again can be very risky the
  • 00:13:51
    example here is we have Abel Abel adds
  • 00:13:53
    Abel's son Baker to the title of Abel's
  • 00:13:55
    home Baker with dreams of becoming a
  • 00:13:57
    llama wool Trader runs up a credit card
  • 00:13:59
    debt to create a llama Ranch but alas
  • 00:14:01
    the world isn't quite ready for high-end
  • 00:14:03
    llama wool Baker defaults and Baker's
  • 00:14:05
    creditors put a lean on ael's home so
  • 00:14:07
    that's what we're talking about maybe
  • 00:14:08
    child running a credit card another one
  • 00:14:10
    might be medical debt right that's
  • 00:14:11
    another example so potential for
  • 00:14:14
    conflict uh let's say Abel decides she
  • 00:14:16
    wants to sell the family home to
  • 00:14:17
    downsize but Baker who's now a cone
  • 00:14:19
    owner refuses because of Baker's
  • 00:14:20
    emotional attachment while I really love
  • 00:14:22
    that I know my llama uh business didn't
  • 00:14:24
    go so well now you've got conflict uh
  • 00:14:27
    Baker wants to rent the property out to
  • 00:14:29
    generate additional income but AEL
  • 00:14:30
    doesn't want a stranger living with Abel
  • 00:14:32
    so Abel says hey I'm want to run out my
  • 00:14:34
    room you know there's two room
  • 00:14:36
    two-bedroom house and and we own it 5050
  • 00:14:38
    I want to rent my half out that's not
  • 00:14:40
    really legal by the way that's not sort
  • 00:14:42
    of a but that's a lot what a lot of
  • 00:14:44
    people think and I think a lay person
  • 00:14:46
    might think that um and then Abel
  • 00:14:48
    notices that the homes Foundation has
  • 00:14:49
    developed significant cracks which could
  • 00:14:51
    lead to Serious structural issues so
  • 00:14:52
    Baker argues they should seek cheaper
  • 00:14:54
    temporary fixes to Baker's Current
  • 00:14:57
    financial constraints so you can see
  • 00:14:58
    here hear this conflict when you add
  • 00:15:00
    someone to uh to a title and again you
  • 00:15:02
    may say well gee my kids are responsible
  • 00:15:05
    my kids are great this will never happen
  • 00:15:06
    you don't know what's going to happen
  • 00:15:07
    right if you say my kids's marriage is
  • 00:15:09
    great half a marriage is in a divorce
  • 00:15:11
    and you know I've been through that I've
  • 00:15:12
    been married for over 30 years and uh we
  • 00:15:15
    my wife and I have seen many people we
  • 00:15:16
    knew who were married who we thought
  • 00:15:17
    would never be divorced and you know
  • 00:15:19
    they're divorced and and you probably
  • 00:15:20
    see that as well okay let's talk about
  • 00:15:23
    capital gains tax consequences so this
  • 00:15:24
    is another um downside so let's say you
  • 00:15:27
    have a property you paid $1,000 for that
  • 00:15:29
    is now worth 500,000 this is very common
  • 00:15:32
    in California um many people have had
  • 00:15:34
    property for many years the property's
  • 00:15:35
    gone way up in value and let's say the
  • 00:15:38
    the the parent wants to add a child to
  • 00:15:40
    the title uh and sell the property so if
  • 00:15:43
    the purchase price is 100,000 you're
  • 00:15:45
    your basis meaning if you buy something
  • 00:15:46
    for 100,000 and it's now worth 500 and
  • 00:15:49
    you sell it the gain is the $400,000
  • 00:15:52
    difference pretty simple math 500,000
  • 00:15:54
    minus 100,000 is
  • 00:15:56
    400,000 if you add the child to title
  • 00:15:59
    let's say the parent uh transfers
  • 00:16:01
    transfers the title to the parent and
  • 00:16:03
    the child 50/50 the child's cost basis
  • 00:16:07
    is not 250,000 it's not half of the
  • 00:16:09
    market value when the property changes
  • 00:16:10
    hands but it is what the parents cost
  • 00:16:12
    basis is so in this case the parent owns
  • 00:16:15
    50% the child owns 50% the cost basis of
  • 00:16:18
    the child is 50,000 the cost basis of
  • 00:16:20
    the parent is 50,000 as well the child
  • 00:16:23
    gets $250,000 of the sales proceeds so
  • 00:16:27
    the child's gain is $200 ,000 and that
  • 00:16:29
    is a taxable gain which is up to $75,000
  • 00:16:32
    in California depending on the the
  • 00:16:35
    child's capital gains tax rate so not a
  • 00:16:38
    good outcome uh both the child and the
  • 00:16:40
    parent and perhaps a parent will ow
  • 00:16:41
    capital gains taxes on their respective
  • 00:16:43
    gains now if this happens to be a
  • 00:16:45
    residence the parent if they're if
  • 00:16:47
    they're married filing jointly has a
  • 00:16:49
    $500,000 um capital gains tax exclusion
  • 00:16:52
    on the sale of a home so if this is your
  • 00:16:53
    home you've really stepped in it by
  • 00:16:55
    giving it to your kid so the family
  • 00:16:57
    collectively is paying $75,000 more in
  • 00:16:59
    tax this is a residence you would have
  • 00:17:01
    paid
  • 00:17:01
    nothing this is adding a property to CH
  • 00:17:04
    adding the child to property so we do
  • 00:17:06
    see this a lot people at the end of
  • 00:17:07
    their life they want to they want to
  • 00:17:09
    make sure oh I want this child to have
  • 00:17:10
    this property I'm going to add them to
  • 00:17:12
    title it is better to inherit that
  • 00:17:13
    through a trust or a will that this
  • 00:17:16
    works the same for a will but if you
  • 00:17:17
    inherit it through a will or a trust the
  • 00:17:19
    child gets a stepped up basis so what
  • 00:17:21
    that means is that gain is wiped away
  • 00:17:24
    you's take an eraser it's the capital
  • 00:17:25
    gains tax eraser it just erases that
  • 00:17:28
    gain and races that tax and if this had
  • 00:17:31
    flown flowed through the living trust of
  • 00:17:33
    the parent the child would have no
  • 00:17:35
    capital gains tax saving $75,000 now I
  • 00:17:38
    don't know about you but $75,000 is a
  • 00:17:41
    lot of money to me and it's a lot of
  • 00:17:42
    money to every single one of our clients
  • 00:17:44
    even our wealthiest clients so it makes
  • 00:17:46
    sense to pay attention to this right
  • 00:17:48
    rather than uh just um doing so now if
  • 00:17:51
    you give the whole property the kid that
  • 00:17:53
    could be $150,000 tax bill right so
  • 00:17:56
    because now you're looking at a $400,000
  • 00:17:58
    capital gain so
  • 00:17:59
    I would say on a very high level it's
  • 00:18:01
    better to have that property go to the
  • 00:18:03
    child at death versus during
  • 00:18:06
    Lifetime and when you add your child to
  • 00:18:08
    title it's likely considered a gift what
  • 00:18:10
    does this mean if it's not a sale and a
  • 00:18:12
    lot of people when they add their child
  • 00:18:14
    to title they're not selling it they're
  • 00:18:15
    giving it um it is a all or a portion of
  • 00:18:18
    the property's value which can trigger
  • 00:18:20
    the filing of a gift tax return uh under
  • 00:18:23
    federal law so in
  • 00:18:25
    2018 2018 in 2024
  • 00:18:29
    the uh gift tax exemption is 18,000 so
  • 00:18:32
    if you make a gift of greater than
  • 00:18:33
    18,000 the person who's making the gift
  • 00:18:35
    has to file a gift tax return next year
  • 00:18:38
    and we're in 2024 in 2025 that'll be
  • 00:18:41
    19,000 uh but um you have to go over
  • 00:18:45
    your lifetime gifts which for 2025 will
  • 00:18:47
    be 13.99 million so it's kind of rare
  • 00:18:50
    that tax is paid when a gift tax return
  • 00:18:53
    is filed but it still does have to be
  • 00:18:54
    filed and that chips away at the amount
  • 00:18:56
    that you can leave taxfree when you pass
  • 00:18:58
    away
  • 00:18:59
    uh there's a kind of a weird
  • 00:19:02
    basic you know foundational question of
  • 00:19:06
    if you start adding one child to this
  • 00:19:08
    property and another child to that
  • 00:19:10
    property and the children get an unequal
  • 00:19:16
    distribution that can cause problems now
  • 00:19:19
    this is kind of goes to kindergarten
  • 00:19:20
    fairness now what do I mean by that I
  • 00:19:22
    have three children and my estate plan
  • 00:19:25
    says I leave everything equally to my
  • 00:19:26
    three
  • 00:19:27
    children because I think I don't want to
  • 00:19:30
    leave more to one and less to another
  • 00:19:32
    because they're just going to be mad so
  • 00:19:34
    when I'm gone they're going to ones the
  • 00:19:35
    one who didn't get as much would look at
  • 00:19:37
    the others and say you know that's
  • 00:19:39
    that's terrible I don't want to have
  • 00:19:40
    Thanksgiving with you ever again I don't
  • 00:19:41
    want to see you again that happens right
  • 00:19:44
    that can happen when when people leave
  • 00:19:46
    it unequally if you are free to leave it
  • 00:19:48
    unequally and you may have your reasons
  • 00:19:50
    to leave it unequally but for me
  • 00:19:51
    personally I'm I'm looking at an equal
  • 00:19:54
    distribution which is the vast majority
  • 00:19:56
    of clients it is an equal distribution
  • 00:19:58
    if you help out one child uh but not the
  • 00:20:01
    other and by definition if you're adding
  • 00:20:03
    children to title the numbers are never
  • 00:20:05
    going to be equalized right um because
  • 00:20:08
    all properties are are unique and
  • 00:20:10
    different how's how's that going to play
  • 00:20:13
    out when you're gone right or even when
  • 00:20:14
    you're alive um there is a provision in
  • 00:20:18
    the California probate code that allows
  • 00:20:19
    for an advance on an inheritance you can
  • 00:20:22
    identify a specific gift as an advance
  • 00:20:24
    and so what that means is if you were to
  • 00:20:26
    give a child
  • 00:20:27
    $500,000 and say Here's a $500,000 gift
  • 00:20:30
    the child acknowledges that as an
  • 00:20:31
    advance on The Inheritance so when you
  • 00:20:34
    pass away and your assets are are
  • 00:20:36
    inventory and everything's added up to
  • 00:20:37
    be split up that $500,000 gift is
  • 00:20:40
    factored in to the distribution Among
  • 00:20:43
    The Heirs so important to understand
  • 00:20:45
    that it is not automatic there's a
  • 00:20:47
    process attached to it and you have to
  • 00:20:49
    get the acknowledgement of the person
  • 00:20:50
    who is receiving the Advance on The
  • 00:20:51
    Inheritance acknowledging that it's the
  • 00:20:53
    Advance on The Inheritance and we do
  • 00:20:54
    cover that in other webinars um and then
  • 00:20:57
    there's also here uh distribution of
  • 00:20:58
    Note versus cancellation of debt for you
  • 00:21:00
    CPA watching this uh cancellation of
  • 00:21:03
    debt is taxable as income distribution
  • 00:21:05
    of a note is not so if there's a note um
  • 00:21:09
    and and a lot of times we will equalize
  • 00:21:11
    in estate using a note where a child
  • 00:21:13
    will get it a note um maybe for a some
  • 00:21:18
    type of planning mechanism just
  • 00:21:19
    understand that there's a difference
  • 00:21:20
    there that's more for CPAs than than
  • 00:21:22
    late people
  • 00:21:34
    so let's talk about loans mom lends
  • 00:21:36
    200,000 a son and mom gifts 200,000 a
  • 00:21:40
    daughter right so Mom is has uh lent
  • 00:21:43
    money to son maybe it's a note secured
  • 00:21:46
    by daa Trust on on a property so Mom
  • 00:21:49
    lends 200,000 a son to buy a property
  • 00:21:51
    and Mom just gives 200,000 to the
  • 00:21:53
    daughter mom dies and the $200,000 lent
  • 00:21:57
    200,000 lent to the son is part of Mom's
  • 00:22:00
    estate as a note the $200,000 gift is
  • 00:22:04
    not in Mom's estate so son has to pay
  • 00:22:07
    back the estate the daughter does not
  • 00:22:10
    unless the daughter's $200,000 gift was
  • 00:22:12
    documented was essentially booked as an
  • 00:22:14
    advance on her inheritance it is not
  • 00:22:16
    counted against the daughter so this is
  • 00:22:18
    very very important when you are if you
  • 00:22:21
    might be helping out a child buy a home
  • 00:22:24
    okay many people uh do that now in
  • 00:22:27
    California it's very common and the two
  • 00:22:29
    ways you're going to do it you're either
  • 00:22:30
    going to lend the money to your child or
  • 00:22:32
    it's going to be a gift and the Title
  • 00:22:34
    Company's going to ask you is this a
  • 00:22:35
    loan or a gift and that's it so you're
  • 00:22:38
    an owner or a loner in our society those
  • 00:22:41
    are the two ways we handle property
  • 00:22:44
    you're an owner if it's a gift and
  • 00:22:45
    you're a laner if it's a loan so Mom has
  • 00:22:48
    lent the money to the child and Mom has
  • 00:22:50
    owed that money back or mom's estate has
  • 00:22:52
    owed that money back if it's a gift it's
  • 00:22:56
    just a gift it's out of mom's estate so
  • 00:22:58
    those are treated separately and it's
  • 00:22:59
    very important if you're thinking about
  • 00:23:01
    lending to your children or if you're
  • 00:23:03
    thinking about helping your children buy
  • 00:23:04
    a house it's very important to
  • 00:23:05
    understand the difference between this
  • 00:23:07
    and again this goes back to treating
  • 00:23:09
    children um equally which I think most
  • 00:23:11
    people want to do again it's I I think
  • 00:23:13
    it's it's a minority of situations where
  • 00:23:15
    they don't treat them equally and there
  • 00:23:16
    are reasons for that okay everyone has
  • 00:23:18
    their own reasons but I think most
  • 00:23:19
    people want to treat their kids equally
  • 00:23:21
    and think about this how is son going to
  • 00:23:23
    feel if um he has to pay the estate back
  • 00:23:26
    right and the daughter doesn't
  • 00:23:29
    he probably won't feel too well all
  • 00:23:30
    right how do you hold title to real
  • 00:23:32
    estate we covered this in other webinars
  • 00:23:33
    but I do want to give a brief um
  • 00:23:36
    overview of this sole ownership this is
  • 00:23:38
    where I you know Jim Cunningham is the
  • 00:23:39
    owner of the property community property
  • 00:23:41
    community property can only be owned by
  • 00:23:45
    people who are married or state
  • 00:23:47
    registered domestic Partners so this
  • 00:23:49
    under California law if you're a state
  • 00:23:51
    registered domestic partner or a
  • 00:23:54
    California uh or a a married couple only
  • 00:23:57
    those people can own community Comm
  • 00:23:58
    property single people cannot own
  • 00:24:00
    community property okay joint tency
  • 00:24:03
    joint tency is also known as joint tency
  • 00:24:05
    with right of survivorship joint
  • 00:24:07
    tendency says that it's uh if there are
  • 00:24:09
    three people on title it's a third a
  • 00:24:11
    third a third if they are four people on
  • 00:24:12
    title it's 25% each and I sorry to throw
  • 00:24:15
    math at you in fractions I apologize uh
  • 00:24:18
    but it if as many people are it is an
  • 00:24:20
    equal share so they're all equal it's
  • 00:24:22
    kind of like King Arthur's knights at
  • 00:24:24
    the round table Everyone's an equal at
  • 00:24:27
    joint in common can be different so it
  • 00:24:29
    can be 9010 it can be 8020 it can be 80
  • 00:24:32
    1010 and it does not have to be equal
  • 00:24:35
    joint tency in California does have what
  • 00:24:38
    is called a right of survivorship so you
  • 00:24:39
    have three people and one dies those two
  • 00:24:42
    people left standing own the property if
  • 00:24:45
    that third person who died is married
  • 00:24:47
    that's a problem right because their
  • 00:24:49
    spouse would be like wait a minute I I
  • 00:24:50
    thought I was going to step into shoes
  • 00:24:52
    there so it's very important when you
  • 00:24:53
    when you take title the property to pay
  • 00:24:55
    attention to what this means and if
  • 00:24:56
    you're confused about this you can
  • 00:24:58
    certainly reach out to us and we can
  • 00:24:59
    walk you through it uh community
  • 00:25:01
    property with right of survivorship so
  • 00:25:03
    community properties owned by married
  • 00:25:04
    people uh the problem with community
  • 00:25:07
    properties if if it's held if the deed
  • 00:25:10
    says U Abel and Baker As community
  • 00:25:15
    property then if Abel dies baker has to
  • 00:25:17
    go through a probate to get title if
  • 00:25:19
    Abel and Baker hold the property is
  • 00:25:21
    community property with right of
  • 00:25:22
    survivorship and able dies Baker does
  • 00:25:24
    not have to go to court to get uh clear
  • 00:25:27
    title so a lot of people uh do have kind
  • 00:25:30
    of moved to community property with
  • 00:25:31
    right of survivorship and then the
  • 00:25:32
    property can be titled in an LLC
  • 00:25:34
    partnership or corporation uh or a trust
  • 00:25:37
    for example a living trust I will say
  • 00:25:39
    one issue if you're holding commercial
  • 00:25:41
    property or rental property or you're
  • 00:25:43
    trying to borrow money uh or conduct
  • 00:25:45
    business a lot of times a trust will
  • 00:25:47
    create an LLC so that the LLC is on
  • 00:25:50
    title but the shares of the LLC are
  • 00:25:51
    owned by a trust it's just a little bit
  • 00:25:53
    easier to uh to bank and to to deal with
  • 00:25:57
    life with an LLC versus versus a trust
  • 00:25:59
    now I'm not talking about a living trust
  • 00:26:01
    but I'm talking about an irrevocable
  • 00:26:03
    trust or maybe um you know a trust where
  • 00:26:05
    you're making a gift so um if more than
  • 00:26:09
    one person is on title you have two
  • 00:26:10
    choices joint tency in California that
  • 00:26:12
    has a right of survivorship so two or
  • 00:26:13
    more people are entitle tency in common
  • 00:26:16
    two or more people upon the death of one
  • 00:26:18
    over or if it's a joint tency on the
  • 00:26:20
    death of one over the TR the Property
  • 00:26:22
    Transfers to the survivors uh but the
  • 00:26:24
    surviving joint tenant has to file a
  • 00:26:26
    death certificate and Affidavit of
  • 00:26:27
    Survivor ship with the County recorder
  • 00:26:30
    and in tency in common when one of those
  • 00:26:32
    tenants dies that share goes through
  • 00:26:35
    probate so it's a little bit different
  • 00:26:37
    so if it's AEL and Baker As joint
  • 00:26:38
    tenants able dies Baker gets the
  • 00:26:40
    property if it's AEL and Baker As
  • 00:26:42
    tenants in common Abel dies ael's estate
  • 00:26:46
    goes through probate and that may go to
  • 00:26:48
    Baker it may may not go to Baker we
  • 00:26:49
    don't know it depends on it depends on
  • 00:26:51
    ael's will so probates really bad in
  • 00:26:54
    California we've covered this in other
  • 00:26:56
    webinars it takes 16 to 24 months the
  • 00:26:58
    probate fees are 48% of the gross value
  • 00:27:00
    of the estate if there's debt on the
  • 00:27:02
    estate if there's debt on the property
  • 00:27:04
    it could be 100% And there's absolutely
  • 00:27:06
    no privacy who inherits what open matter
  • 00:27:09
    of public record addresses dates that
  • 00:27:12
    people inherit all a matter of public
  • 00:27:14
    record um and for a lot of people this
  • 00:27:16
    is kind of freaky because their estate
  • 00:27:19
    all what they own becomes a matter of
  • 00:27:21
    public record course you're dead you're
  • 00:27:22
    not going to feel anything right I mean
  • 00:27:25
    but it's your kids right or your maybe
  • 00:27:27
    your heirs who are on there and their
  • 00:27:29
    name address and how much they inherit
  • 00:27:32
    at the end of the estate is all a matter
  • 00:27:34
    of public record and that is is kind of
  • 00:27:36
    weird if you think about it um if a
  • 00:27:39
    property is if you have a million dollar
  • 00:27:41
    property and there's a $900,000 mortgage
  • 00:27:43
    on the property the probate fees are
  • 00:27:44
    still $50,000 so that $50,000 Equity
  • 00:27:47
    evaporates effectively 100% uh probate
  • 00:27:50
    fee so having only a will means you will
  • 00:27:53
    go to probate court so will you can
  • 00:27:55
    think of will is synonymous with probate
  • 00:27:57
    probate in California is a formal uh
  • 00:27:59
    Court governed process it is not the
  • 00:28:01
    same in other states uh New York has a
  • 00:28:02
    formal process as well we do have a fee
  • 00:28:04
    calculator a probate fee calculator on
  • 00:28:06
    our website so if you're thinking gee I
  • 00:28:08
    want to get I want to put my child on
  • 00:28:10
    title to avoid
  • 00:28:12
    probate that's a good thing to avoid
  • 00:28:14
    probate but you're probably going to
  • 00:28:15
    want to do a living trust that is the
  • 00:28:17
    the better way to give your child to
  • 00:28:19
    your home give your home to your child
  • 00:28:21
    so let's talk about better ways to give
  • 00:28:23
    your child your home well an outright
  • 00:28:26
    gift you you have an outright gift you
  • 00:28:28
    can loan the money right or or loan the
  • 00:28:30
    money to buy a property you can create a
  • 00:28:32
    trust you can create an LLC there are a
  • 00:28:35
    lot of ways you can give your child a
  • 00:28:37
    home um or your home um the outright
  • 00:28:40
    gift again not not great for tax reasons
  • 00:28:44
    uh if you don't have a tax issue which a
  • 00:28:46
    lot of people do that might not be such
  • 00:28:48
    a bad idea um you can lend them money to
  • 00:28:50
    buy a house and you or you could use
  • 00:28:52
    your living trust living trust is what
  • 00:28:53
    most people do so um let's talk
  • 00:28:56
    about help your child get a property
  • 00:28:59
    right so you can give them money for an
  • 00:29:01
    outright purchase okay you can give them
  • 00:29:04
    a down payment you can just give them
  • 00:29:05
    the whole property there are anti-money
  • 00:29:08
    laundering issues what do I mean by that
  • 00:29:10
    when you when money is goes through a
  • 00:29:12
    title company they are subject to
  • 00:29:14
    anti-money laundering laws there are
  • 00:29:16
    concepts of seasoning which is money has
  • 00:29:18
    to be in an account for a certain period
  • 00:29:20
    of time and they really pay close
  • 00:29:21
    attention to this so this is something
  • 00:29:23
    you're going to want to think about in
  • 00:29:24
    advance um think about separate property
  • 00:29:26
    versus community property if you make a
  • 00:29:28
    gift of property of the entire property
  • 00:29:30
    to your child or part of it in your
  • 00:29:32
    child's name individually it is separate
  • 00:29:34
    property but it can be transmuted to
  • 00:29:36
    community property and then also you
  • 00:29:38
    might need your gift tax return so uh
  • 00:29:41
    let's look at a couple of examples so
  • 00:29:42
    mom gives son a million to purchase a
  • 00:29:45
    home and I'm using the numbers it could
  • 00:29:48
    be 500,000 because some people might go
  • 00:29:50
    wow a million that's a lot other people
  • 00:29:52
    might say oh a million I can't even find
  • 00:29:54
    a house for a million where I live so
  • 00:29:57
    outright gifts of mom to son so mom
  • 00:29:59
    gives son a million dollar to purchase
  • 00:30:01
    the home so how does this work well Mom
  • 00:30:03
    would wire a million dollars to the to
  • 00:30:05
    the escrow account uh and later file the
  • 00:30:08
    form 709 to report the gift so what's
  • 00:30:10
    going on here so in in the year that the
  • 00:30:13
    transaction happens the Sun goes out and
  • 00:30:15
    identifies a property that the sun would
  • 00:30:16
    like and say listen it's going to be an
  • 00:30:17
    all cash transaction the money is going
  • 00:30:19
    to be coming from my mom's account it
  • 00:30:21
    will be booked as a gift on the on the
  • 00:30:24
    escrow level right so they know that
  • 00:30:26
    this is a legit that this money is not
  • 00:30:28
    coming from some criminal activity so
  • 00:30:31
    that m mom is going to wire that money
  • 00:30:33
    into the escrow account directly if Mom
  • 00:30:35
    wires it to sun and a day later Sun
  • 00:30:38
    wires that money into the escrow I think
  • 00:30:40
    you're going to have a problem with that
  • 00:30:42
    okay just realistically so this is why
  • 00:30:44
    you want to talk to your realtor you
  • 00:30:46
    want to talk to your um you want to talk
  • 00:30:48
    to the escrow what's the best way to do
  • 00:30:49
    this this is kind of what we see in
  • 00:30:51
    practice but it's important the gift tax
  • 00:30:53
    return does not happen when the gift is
  • 00:30:54
    made it happens when you file your your
  • 00:30:57
    individual income tax return you're 1040
  • 00:30:59
    the year following the gift so if you
  • 00:31:01
    make a gift in 2024 you'd be filing that
  • 00:31:04
    form 709 in
  • 00:31:06
    2025 uh the other thing mom could do is
  • 00:31:08
    give son $200,000 for a down payment 20%
  • 00:31:11
    fairly standard down payment on the
  • 00:31:12
    million dooll home mom wires the 200,000
  • 00:31:15
    escrow again and later files the form
  • 00:31:16
    709 for the gift of 200,000 the other
  • 00:31:19
    thing mom could do is Mom could buy the
  • 00:31:21
    home herself and she then how she makes
  • 00:31:24
    the the transfer to the sun is she makes
  • 00:31:26
    that um later gifts the home by deed to
  • 00:31:29
    the son so Mom buys the home right
  • 00:31:32
    purchases the home it's in her name and
  • 00:31:34
    then Mom executes a subsequent deed
  • 00:31:36
    transferring the property to Sun this is
  • 00:31:38
    an example of transferring the whole
  • 00:31:39
    property to Sun and then you still have
  • 00:31:42
    to Value the gift and you need an
  • 00:31:44
    appraisal on the date of the gift and
  • 00:31:47
    then Mom would attach that appraisal to
  • 00:31:48
    reform 706 if you make a gift of cash
  • 00:31:51
    you don't have to get an appraisal you
  • 00:31:53
    just report the cash on the gift tax
  • 00:31:54
    return I know this is getting a little
  • 00:31:56
    granular but I just want you to think
  • 00:31:58
    about different ways of doing this um
  • 00:32:00
    and alone so another way people do this
  • 00:32:03
    is they say you know I love my son I
  • 00:32:06
    just don't want to give him a million
  • 00:32:07
    dollars right I and I don't want to give
  • 00:32:09
    him 200,000 and I don't want to buy the
  • 00:32:11
    home and give it to him so uh what can
  • 00:32:13
    you do well you can loan the money so in
  • 00:32:15
    a gift situation the son becomes an
  • 00:32:17
    owner of the money and in this case uh
  • 00:32:20
    you can be an owner or a loaner right in
  • 00:32:22
    this case a mom had owned the 200,000
  • 00:32:25
    and then and then gifted it now she's a
  • 00:32:27
    loner so so she loans money for the um
  • 00:32:31
    for the purchase of the property now a
  • 00:32:35
    loan requires three things a loan
  • 00:32:38
    requires interest repayment of principle
  • 00:32:42
    and security so if you don't have all
  • 00:32:45
    three of those things you might find
  • 00:32:47
    that it's treated as a gift okay so
  • 00:32:50
    those are the three attributes of a loan
  • 00:32:52
    and this there are certain rates that
  • 00:32:55
    apply and what we have here if you're
  • 00:32:56
    watching this on video is we have what
  • 00:32:58
    are called the applicable federal rates
  • 00:33:00
    for December of
  • 00:33:02
    2024 and this is the amount that you
  • 00:33:05
    must charge on a loan this is the
  • 00:33:08
    minimum uh interest that must be charged
  • 00:33:10
    on on a loan otherwise it's deemed a
  • 00:33:12
    gift and um this is a real issue because
  • 00:33:16
    a lot of people say well I'm going to
  • 00:33:18
    lend my child money but I'm not going to
  • 00:33:19
    charge them interest if you do that the
  • 00:33:22
    interest is deemed I mean you're you're
  • 00:33:24
    going to be deemed to have received the
  • 00:33:26
    interest and that's what your CPA going
  • 00:33:27
    to do otherwise it's going to be a gift
  • 00:33:29
    so you can't do an interest free loan
  • 00:33:31
    that does not exist and what we do as
  • 00:33:33
    lawyers is we we if a client comes in
  • 00:33:35
    and they say I'd like to help my child
  • 00:33:37
    buy a property and I'd like to lend them
  • 00:33:39
    some money we say is this going to be um
  • 00:33:42
    you know a short mid or long term and a
  • 00:33:46
    long term is over over nine years and
  • 00:33:48
    shortterm I think is two years and the
  • 00:33:51
    midterm is 2 to 9 years and they
  • 00:33:54
    different rates so uh a lot of times
  • 00:33:57
    these are do nine-year notes or we pick
  • 00:33:59
    the lowest interest rate uh many times
  • 00:34:01
    uh but this is something that does
  • 00:34:02
    either need to be acred or paid and it
  • 00:34:05
    is taxable as income so there's some
  • 00:34:06
    real world consequences to that so let's
  • 00:34:09
    look at some examples a mom loans son a
  • 00:34:10
    million dollars to purchase the home mom
  • 00:34:12
    wires a million dollars to Escrow and
  • 00:34:14
    Sun Signs an interest only note at the
  • 00:34:17
    applicable federal rate in exchange for
  • 00:34:20
    the money coming in so this is where son
  • 00:34:22
    is going to buy a million dollar home
  • 00:34:23
    and Mom says honey I'll just lend you
  • 00:34:25
    the million dollars and that million
  • 00:34:26
    dollars goes into escro and Sun Signs a
  • 00:34:29
    note secured by D to trust that's an
  • 00:34:31
    interest only note that's fine maybe
  • 00:34:33
    it's due in 9 years paying that interest
  • 00:34:35
    every every year mom loans son 200,000
  • 00:34:39
    for the down payment on a hundred on a
  • 00:34:41
    million dollar home mom wires A 200,000
  • 00:34:43
    escrow Sun Signs an interest only note
  • 00:34:45
    but this will be a subordinated note so
  • 00:34:48
    what that means is this is a second
  • 00:34:49
    mortgage a second deed of trust and the
  • 00:34:52
    first deed of trust has priority so the
  • 00:34:54
    bank that's lending
  • 00:34:55
    800,000 if the sun doesn't make the
  • 00:34:57
    payments and the property is sold in
  • 00:34:59
    foreclosure and the sales proceeds are
  • 00:35:01
    800,000 mom gets zero okay Mom gets zero
  • 00:35:06
    because you know unless she buys that
  • 00:35:08
    first and then turns around and sells
  • 00:35:09
    the property that would be uh the risk
  • 00:35:11
    for mom is that she's in second position
  • 00:35:14
    with the million dooll loan mom's in
  • 00:35:15
    first position okay Mom buys home for a
  • 00:35:18
    million dollars and rents it to son
  • 00:35:20
    that's another way of doing it and you
  • 00:35:21
    can see that you know if you're trying
  • 00:35:23
    to help your child get into a property
  • 00:35:27
    um really look at this because it might
  • 00:35:29
    make more sense to buy the home it from
  • 00:35:31
    a wealth creation standpoint it might
  • 00:35:33
    make more sense for mom to buy the home
  • 00:35:36
    and rent it to the son it might also be
  • 00:35:39
    might be better for the mom to lend the
  • 00:35:41
    million to the son it just depends on
  • 00:35:42
    the situation okay mom must charge fair
  • 00:35:45
    market value rent anything less as a
  • 00:35:47
    gift so a million dollar home is going
  • 00:35:48
    to rent for a certain dollar amount
  • 00:35:50
    let's say it's 4,000 a month mom's got
  • 00:35:52
    to charge a 4,000 a month interest what
  • 00:35:54
    or 4,000 a month rent whatever it is Mom
  • 00:35:57
    can depreciate the property so this is
  • 00:35:59
    important so we covered this in other
  • 00:36:00
    webinars on straight line depreciation
  • 00:36:02
    for residential rentals it's 272 years
  • 00:36:05
    which means mom can pick up U reduce her
  • 00:36:07
    income tax liability when son inherits
  • 00:36:10
    that property okay son gets an adjusted
  • 00:36:13
    cost basis right so Mom gets that tax
  • 00:36:16
    benefit while she's alive versus son uh
  • 00:36:19
    versus mom giving the million dollars to
  • 00:36:21
    son and son owns the property um she's
  • 00:36:25
    not getting any tax benefit from that
  • 00:36:27
    the son
  • 00:36:28
    are not getting any tax benefit now the
  • 00:36:29
    son is paying rent so he's got to pay
  • 00:36:31
    money to his mom but um you know again
  • 00:36:34
    we run the numbers does it make sense to
  • 00:36:35
    do that does it not so this may require
  • 00:36:37
    Mom all of these may require mom to
  • 00:36:39
    update her estate plan and add what we
  • 00:36:41
    call nonpr language meaning the sun gets
  • 00:36:43
    the property but maybe the daughter gets
  • 00:36:46
    another property or some money or cash
  • 00:36:48
    um and uh if there's a note if the son
  • 00:36:51
    owes let's say Mom lends a son $200,000
  • 00:36:55
    to buy a property and that note is still
  • 00:36:57
    in Mom's estate mom can distribute the
  • 00:37:00
    note to son okay this is not
  • 00:37:02
    cancellation of debt it's a distribution
  • 00:37:04
    of note should not be recognized as
  • 00:37:06
    taxable as income it's an asset of the
  • 00:37:09
    estate okay so that would be
  • 00:37:11
    distribution of the note uh after Mom
  • 00:37:13
    passes away again this is going to
  • 00:37:14
    require a little modification to your
  • 00:37:16
    estate plan uh how do you protect a gift
  • 00:37:18
    or inheritance from threats um a lot of
  • 00:37:21
    people don't think that their kids might
  • 00:37:23
    need asset protection okay outright
  • 00:37:25
    gifts are not protected they're not and
  • 00:37:28
    if you make an outright gift I think a
  • 00:37:30
    lot of people even know if it's a
  • 00:37:31
    substantial gift look if you make a gift
  • 00:37:33
    of $10,000 to a kid and they spend it
  • 00:37:36
    all right it's gone there's there's
  • 00:37:37
    nothing left to protect but if you're
  • 00:37:39
    giving a substantial gift uh if you're
  • 00:37:40
    giving real estate something that isn't
  • 00:37:42
    immediately consumable really consider a
  • 00:37:44
    dynasty or other gifting trust when
  • 00:37:46
    making a sizable gift to a child or
  • 00:37:47
    other loved one and the reason is uh
  • 00:37:50
    when you make that gift to a child in
  • 00:37:52
    the child's own name it is immediately
  • 00:37:54
    subject to the claims of creditors
  • 00:37:55
    divorce creditors uh judgement creditors
  • 00:37:58
    government seizure whatever it is if if
  • 00:38:00
    some problems arise uh and so what a lot
  • 00:38:03
    of our clients do is if they're going to
  • 00:38:04
    make a gift of a property to a child
  • 00:38:06
    it's done in a trust right with a trust
  • 00:38:08
    wrapper and that gives the child some
  • 00:38:11
    significant creditor protection so at
  • 00:38:13
    death consider what we call an
  • 00:38:15
    inheritance protection trust or doll it
  • 00:38:17
    out trust The Inheritance protection
  • 00:38:18
    trust is where you leave your The
  • 00:38:22
    Inheritance that you leave to a very
  • 00:38:24
    responsible child that child has
  • 00:38:26
    significant control over that asset it's
  • 00:38:28
    almost like they they they own it
  • 00:38:30
    themselves but it is in a trust
  • 00:38:32
    sometimes they're trustee sometimes
  • 00:38:33
    they're not and and they're different
  • 00:38:35
    layers of what it means to be trusty and
  • 00:38:36
    we covered that in other in other videos
  • 00:38:38
    but it can protect it from a divorce it
  • 00:38:40
    can protect it from from claims of other
  • 00:38:42
    creditors and it can also stay outside
  • 00:38:44
    of the estate of your child so if you
  • 00:38:47
    leave an asset to your child and your
  • 00:38:49
    child has a taxable estate uh meaning
  • 00:38:52
    you have assets over 14 million then um
  • 00:38:55
    there is a way to write that up so that
  • 00:38:57
    you're you're not going to pay that 40
  • 00:38:58
    or 45% death tax when the child passes
  • 00:39:00
    away also a dolet out trust we cover
  • 00:39:03
    that that's for kind of a less than
  • 00:39:04
    responsible air somebody who maybe would
  • 00:39:05
    blow the money and you're really
  • 00:39:07
    concerned that maybe your son or
  • 00:39:08
    daughter they inherit that million
  • 00:39:10
    dollars is going to blow it a lot of
  • 00:39:12
    times we set up a trust where that child
  • 00:39:13
    might
  • 00:39:15
    get $4,000 a month whatever it is uh as
  • 00:39:18
    sort of a stipend rather than the full
  • 00:39:20
    amount and and I think we all have our
  • 00:39:22
    reasons why that why they might need
  • 00:39:24
    that but that's something that we do uh
  • 00:39:26
    quite often for clients so how does it
  • 00:39:28
    you know we talk about living trusts for
  • 00:39:29
    those of you who've never heard of a
  • 00:39:30
    living trust uh and for those of you who
  • 00:39:33
    have this will be a bit of a refresher
  • 00:39:35
    I'm not going to belabor the point but a
  • 00:39:36
    living trust is a lot like a bucket it's
  • 00:39:38
    with a handle this handle the trustee
  • 00:39:40
    holds on to the bucket holds your house
  • 00:39:42
    your investment properties your stocks
  • 00:39:43
    Bond savings mutual funds um and you
  • 00:39:46
    transfer those by deed so that the the
  • 00:39:49
    the real estate transfers by deed the
  • 00:39:51
    the accounts transfer because you go to
  • 00:39:53
    the institution and you change the the
  • 00:39:54
    titling at the institution level and
  • 00:39:56
    that trustee holds onto the bucket Iris
  • 00:39:58
    401 k and nudi stay out of the trust
  • 00:40:00
    bucket um all trustees are always going
  • 00:40:03
    to have to have a trustee that someone
  • 00:40:04
    at the at the driver's wheel right
  • 00:40:06
    driving the trust a beneficiary that's a
  • 00:40:08
    person who gets the benefit or the goods
  • 00:40:10
    the benad right the goods from the trust
  • 00:40:12
    and uh the Corpus or stuff so you have
  • 00:40:14
    to have those three things a trust take
  • 00:40:16
    care a living trust takes care of your
  • 00:40:18
    assets while you're living avoids
  • 00:40:19
    probated death and incapacity and this
  • 00:40:22
    can protect an inheritance from divorc
  • 00:40:24
    taxes and lawsuits if it's properly
  • 00:40:25
    structured I will say most most of the
  • 00:40:27
    living trust that we see certainly from
  • 00:40:30
    um people outside of our Law Firm or
  • 00:40:32
    clients who come in from with trust
  • 00:40:34
    drafted by other firms do not have these
  • 00:40:35
    protections do not have uh divorce
  • 00:40:38
    protection for heirs uh so it's a not I
  • 00:40:40
    don't know why other law firms don't do
  • 00:40:42
    this but um certainly these uh these are
  • 00:40:45
    out there these tools are out there and
  • 00:40:46
    I really encourage you to take a look at
  • 00:40:48
    those this can um a revocable trust
  • 00:40:51
    typically becomes irrevocable at death
  • 00:40:53
    so while you're alive it's it's easily
  • 00:40:54
    malleable and changeable but once you
  • 00:40:57
    pass away uh it does become irrevocable
  • 00:41:00
    and uh it's private and a probate is
  • 00:41:03
    creditor focused so probate is something
  • 00:41:05
    where you know it's designed to benefit
  • 00:41:07
    creditors trusts are designed to benefit
  • 00:41:09
    beneficiaries so if you're going to
  • 00:41:11
    leave property to a child we recommend
  • 00:41:13
    that it it flow through it's best to
  • 00:41:16
    happen at death it's best to flow
  • 00:41:17
    through a living trust that really
  • 00:41:19
    optimizes the gift to uh the child now
  • 00:41:23
    what if your title is a partnership LLC
  • 00:41:25
    or Corporation how does that work it's a
  • 00:41:27
    little bit different than people on
  • 00:41:29
    title this is what we call lawyers call
  • 00:41:31
    this an entity um and the ownership
  • 00:41:36
    interest is defined in what we call the
  • 00:41:38
    corporate documents now for for the term
  • 00:41:40
    corporate applies to Partnerships llc's
  • 00:41:42
    and corporations a little confusing but
  • 00:41:44
    if you hear lawyers talk about this or
  • 00:41:46
    or do any research on this they'll talk
  • 00:41:48
    about the corporate documents well how
  • 00:41:49
    can a partnership have corporate
  • 00:41:50
    documents well partnership has a
  • 00:41:52
    partnership agreement but we
  • 00:41:53
    collectively talk to talk about those as
  • 00:41:55
    corporate documents
  • 00:41:57
    and the title of the property is in the
  • 00:41:59
    name of the LLC partnership or
  • 00:42:00
    Corporation by the way we don't see a
  • 00:42:02
    lot of property currently being put into
  • 00:42:04
    a corporation people tended to put
  • 00:42:07
    property in a corporation before
  • 00:42:08
    creation of llc's when we only had
  • 00:42:10
    limited Partnerships and that's from a
  • 00:42:13
    very very long time ago and um a lot of
  • 00:42:16
    times that property was put into the
  • 00:42:17
    corporation in like the 30s the 40s or
  • 00:42:19
    the 50s maybe even the 60s but these are
  • 00:42:22
    real Legacy type um entities so if
  • 00:42:24
    you're looking to create something I
  • 00:42:26
    would not look at a corporation
  • 00:42:28
    broadly speaking to put your real estate
  • 00:42:29
    in there you're going to be using a
  • 00:42:31
    partnership or an LLC potentially taxed
  • 00:42:34
    as a partnership so property is used for
  • 00:42:37
    the partnership purposes so this real
  • 00:42:38
    estate title is in the name of the
  • 00:42:40
    partnership the purchaser if somebody
  • 00:42:42
    buys an interest in the in the property
  • 00:42:45
    what they're really doing is they're
  • 00:42:46
    buying an interest in the partnership or
  • 00:42:48
    the corporate entity itself the
  • 00:42:49
    partnership or the LLC they're not
  • 00:42:51
    buying the property itself because the
  • 00:42:53
    entity owns the property at death these
  • 00:42:56
    interests pass in accordance with the
  • 00:42:58
    partnership agreement or the LLC
  • 00:43:00
    operating agreement or the corporate
  • 00:43:01
    bylaws so you'll typically have Buy sell
  • 00:43:04
    you'll typically have some written
  • 00:43:07
    agreement that clearly defines what
  • 00:43:09
    happens when somebody dies this is
  • 00:43:11
    really important because an LLC does not
  • 00:43:12
    require an operating agreement so if you
  • 00:43:15
    have an LLC and you put property into
  • 00:43:16
    the LLC and there's no it's silent about
  • 00:43:20
    the succession to the shares of the LLC
  • 00:43:23
    at death you're going to have to rely on
  • 00:43:24
    state law and you're better off with an
  • 00:43:27
    operating agreement so um the creditors
  • 00:43:30
    can get shares of the profits or
  • 00:43:31
    foreclose on the partnership so one
  • 00:43:33
    problem with a any frankly well the one
  • 00:43:39
    problem with an LLC or a partnership
  • 00:43:40
    that is is uh created under the laws of
  • 00:43:43
    California is a creditor of the person
  • 00:43:46
    who's a partner or a member of the LLC
  • 00:43:48
    right so let's say you have a property
  • 00:43:50
    in an LLC and you
  • 00:43:52
    transfer 50% of the LLC to your child
  • 00:43:55
    because you want you want to give them
  • 00:43:57
    some of the the business interest right
  • 00:43:59
    and you just put that in the child's
  • 00:44:00
    name that child runs up creditors uh you
  • 00:44:03
    know runs up debts the creditors then
  • 00:44:05
    get a judgment against the child the
  • 00:44:07
    Creditor can foreclose on the child's
  • 00:44:10
    LLC interest much in the same way that a
  • 00:44:13
    creditor would foreclose on real
  • 00:44:14
    property and take ownership of the
  • 00:44:16
    property so you put your kid on for 50%
  • 00:44:18
    on the LLC that kid gets into trouble
  • 00:44:21
    the kids creditors foreclose on those
  • 00:44:23
    shares now you are partners with your
  • 00:44:25
    child's creditors you are 5050 partners
  • 00:44:27
    with your child's creditors there are
  • 00:44:29
    ways to avoid this this is why people
  • 00:44:31
    use a Wyoming close LLC and how this
  • 00:44:34
    works is instead of you owning the
  • 00:44:35
    shares of the LLC and of the California
  • 00:44:39
    LLC that owns the California bricks and
  • 00:44:40
    sticks and dirt right the property so
  • 00:44:43
    the properties in the name of the LLC
  • 00:44:45
    the shares are in your name and you
  • 00:44:46
    transfer those shares to your your child
  • 00:44:50
    50% a lot of people use a Wyoming LLC a
  • 00:44:54
    Wyoming close LLC that's a holding
  • 00:44:55
    company and transfer the shares of the
  • 00:44:58
    holding company and the reason is is
  • 00:44:59
    that prohibits the Creditor from
  • 00:45:01
    foreclosing on the LLC because they have
  • 00:45:03
    to go through the Wyoming LLC first now
  • 00:45:06
    we cover this in other
  • 00:45:07
    webinars um and uh it's something very
  • 00:45:11
    important to understand so if you're
  • 00:45:12
    going to be making Gifts of LLC interest
  • 00:45:14
    to your children you really want to to
  • 00:45:16
    meet with a lawyer who knows what
  • 00:45:18
    they're doing like an attorney at our
  • 00:45:19
    firm because we can walk you through
  • 00:45:21
    these issues a lot of a lot of attorneys
  • 00:45:22
    don't know know this even attorneys that
  • 00:45:24
    do corporate work um they're not they're
  • 00:45:26
    not so much in the asset protection
  • 00:45:28
    space um if you say gee I'd like an LLC
  • 00:45:30
    and I want to give my kid 50% sure we'll
  • 00:45:32
    do that but you need to make sure that
  • 00:45:34
    you're protected right that's where
  • 00:45:35
    we're going with that so title in an
  • 00:45:37
    entity U the LLC membership interest can
  • 00:45:39
    be transferred at the owner's death so
  • 00:45:41
    let's say you have an LLC so this
  • 00:45:43
    answers the question hey I've got an LLC
  • 00:45:45
    I want to move some of these LLC shares
  • 00:45:47
    into my kids name what's the best way to
  • 00:45:49
    do it again probably gonna death is
  • 00:45:51
    probably the best way to do it in uh for
  • 00:45:53
    for tax reasons and asset protection
  • 00:45:55
    reasons um but how does it transfer well
  • 00:45:58
    the terms of the operating agreement
  • 00:45:59
    control uh estate planning document
  • 00:46:02
    documents can also control uh or it's
  • 00:46:05
    under intestate succession if you don't
  • 00:46:07
    if you have an LLC but don't have a will
  • 00:46:09
    and you know who inherits the LLC it's
  • 00:46:11
    going to be intestate succession the in
  • 00:46:13
    uh entity documents such as the LLC
  • 00:46:15
    operating agreement can also include
  • 00:46:16
    rules about death and how the real
  • 00:46:18
    estates to be used and managed so that
  • 00:46:20
    would be uh byell agreements broadly
  • 00:46:22
    speaking byell or what happens when
  • 00:46:24
    somebody separates from the LLC meaning
  • 00:46:27
    you own the shares of the LLC you die
  • 00:46:29
    you've separated from the LLC because
  • 00:46:31
    you're not on Earth anymore and what
  • 00:46:32
    happens to those shares and what's the
  • 00:46:34
    process that should be outlined you know
  • 00:46:35
    if your LLC has assets that should be
  • 00:46:37
    outlined in the LLC so um let's look at
  • 00:46:40
    an example of uh Oscar Oscar conveys
  • 00:46:43
    whiteacre to whiteacre LLC a California
  • 00:46:45
    limited liability company Papa Quebec
  • 00:46:47
    and Romeo are the members of whiteacre
  • 00:46:49
    LLC so Oscar's the owner of whiteacre
  • 00:46:52
    Papa Quebec and Romeo create whiteacre
  • 00:46:54
    LLC and then they buy white LLC from
  • 00:46:57
    Oscar who's a human with a heartbeat and
  • 00:46:59
    he Oscar signs the deed Papa so Papa
  • 00:47:02
    Quebec and Romeo are not the owners of
  • 00:47:04
    the property wher LLC is the owner of
  • 00:47:07
    the property right so Papa who's single
  • 00:47:10
    dies owning his LLC interest in his own
  • 00:47:12
    name Papa's family initiates a formal
  • 00:47:14
    probate action Quebec and Romeo by
  • 00:47:16
    Papa's LLC interest from the estate of
  • 00:47:18
    Papa in white acre LLC and Quebec and
  • 00:47:21
    Romeo continu as owners a whiteacre it's
  • 00:47:23
    a very important title does not change
  • 00:47:25
    okay but you still have to go through
  • 00:47:27
    probate right papa's name is not on the
  • 00:47:30
    property but Papa's estate still has to
  • 00:47:32
    go through probate can't they do this
  • 00:47:34
    without probate yes but you have to have
  • 00:47:37
    the structure in the LLC operating
  • 00:47:39
    agreement as well as papa needs should
  • 00:47:42
    be doing a living trust so the shares of
  • 00:47:43
    that LLC that are in papa's name go to
  • 00:47:46
    papa's living trust uh you could
  • 00:47:48
    theoretically have a pay on death
  • 00:47:51
    provision that gets into uh Buy sell
  • 00:47:53
    agreements on uh on llc's and we cover
  • 00:47:57
    that in other webinars so that brings us
  • 00:47:59
    to the end of our materials today and
  • 00:48:01
    thank you for joining us we have office
  • 00:48:03
    locations uh throughout northern and
  • 00:48:04
    southern California and uh what should
  • 00:48:07
    you expect when you call Cunningham
  • 00:48:08
    legal or schedule uh an online
  • 00:48:11
    consultation uh when you call it will be
  • 00:48:13
    one of our one of our client Specialists
  • 00:48:15
    the attorneys don't answer the phone do
  • 00:48:17
    let us know if you want an update uh to
  • 00:48:19
    an estate plan or to create an estate
  • 00:48:20
    plan or if someone's passed that's
  • 00:48:22
    that's very important also if you're a
  • 00:48:24
    business owner or looking at business or
  • 00:48:26
    income tax planning let us know what
  • 00:48:28
    what you're looking for um and then tell
  • 00:48:30
    us your estate planning and your tax
  • 00:48:32
    planning goals so that's that's very
  • 00:48:34
    important you can tell that to the
  • 00:48:35
    person that's on the phone I would say
  • 00:48:37
    don't ask for pricing only attorneys can
  • 00:48:38
    quote legal fees and uh don't ask for
  • 00:48:40
    legal advice and because only attorneys
  • 00:48:42
    can give legal advice and the again the
  • 00:48:44
    person you're talking to is not a lawyer
  • 00:48:46
    but they're helping facilitate if if if
  • 00:48:48
    we can add value and we can help you
  • 00:48:50
    right that's that's basically what we're
  • 00:48:52
    doing and the goal of that initial call
  • 00:48:53
    is to set an appointment with one of our
  • 00:48:55
    lawyers or not and so it's fine give us
  • 00:48:57
    a call there's no charge to call to call
  • 00:49:00
    us and talk with somebody if you're
  • 00:49:01
    talking to a lawyer uh typically there
  • 00:49:03
    is and they can go over that with you on
  • 00:49:04
    the phone if you're watching this on
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    YouTube please subscribe to our YouTube
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    please review us on Google and I'd love
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    doing these webinars I got to tell you
  • 00:49:14
    I've been getting recently a lot of
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    positive feedback and it's very
  • 00:49:17
    gratifying so uh if if you say hey Jim
  • 00:49:20
    great job love your webinars I'm going
  • 00:49:21
    to do more it get gets me pumped up and
  • 00:49:23
    gets me excited and next is Donor
  • 00:49:25
    advised funds versus private foundations
  • 00:49:27
    that is December 19th at 10
  • 00:49:31
    a.m. that is going to be a great topic
  • 00:49:35
    because we're coming to the end of the
  • 00:49:36
    year people want to save taxes what is
  • 00:49:38
    the difference donor advis fund versus
  • 00:49:41
    private foundation so if you're
  • 00:49:42
    charitably inclined and want to manage
  • 00:49:43
    your charitable contributions a great
  • 00:49:46
    webinar to attend and we will open it up
  • 00:49:48
    for questions if you're watching this on
  • 00:49:50
    YouTube please continue watching because
  • 00:49:52
    magically another webinar is just going
  • 00:49:54
    to roll right after this one and it may
  • 00:49:56
    the one we just mentioned so we'll look
  • 00:49:59
    forward to seeing you soon
  • 00:50:01
    [Music]
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    [Music]
Etiquetas
  • estate planning
  • property transfer
  • legal advice
  • probate
  • trusts
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  • capital gains taxes
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  • inheritance