Common Mistakes People Make:
A lot of people try to avoid probate by putting their children or executor on the title of their property with them. There are two major problems with putting someone other than your spouse on the title of the property with you:
1. Liability Example:
If Bill and Sue put their children or executor on the title of their property as a joint owner, what would happen if one of the children filed for bankruptcy...or had a tax lien...or got sued...or divorced? Bill and Sue's property could be used to satisfy any of these liabilities.
2. Capital Gains Tax Example:
Bill and Sue purchased their home for $100,000 and decide to put their children (or executor) on the title as joint owners to avoid probate when they pass away. Let's say when Bill and Sue pass away, their home is now worth $350,000. When their children (or executor) go to sell the property, there is NOT going to be a probate. But their children (or executor) will be asked if the property is their "Primary Residence". Most of the time, the children (or executor) are not living in their parent's home, so they are unable to claim the property as their primary residence. So if the property was originally purchased for $100,000 and is now worth $350,000, that means there has been a $250,000 gain in the value of the property. This $250,000 gain would now be subject to the capital gains tax which are between 10-20%. So in this example, Bill and Sue avoided Probate, but their beneficiaries received $25,000-$50,000 less due to the capital gains tax.