August 25, 2010 Today’s question and answer came from AVVO.Com. The person, a single parent of one child, had set up her daughter as the Pay-On-Death beneficiary of her bank accounts. Now she wanted to figure out a way of transferring her homes to the daughter without making a trust. My advice to her follows. Q: if a person only has one child and her name is on bank accounts as POD, and there are two homes, is a trust still necessary? what is the best way to transfer homes without a trust. Would a will still go to probate? My Answer: The only way to transfer the homes to your child without a trust (and avoid probate) is to place her name on title as a joint tenant. On the parent’s death, the child would record an “Affidavit – Death of Joint Tenant” with the proper County Recorder to clear the title. However, there are drawbacks to doing this type of self-help estate planning. The first is that your child would be a co-owner of the house. There are two obvious problems with this. A: Her creditors could go after the house to collect on judgments against her, and her interest in the home would be an asset if she ever declared bankruptcy. B: If you had a falling-out, she could break the joint tenancy by recording a deed from herself to herself, and then petition to force a sale of the real property and split the equity. I have personally represented both parents and children where this has happened – there is no way to force her to return the property. The second drawback is that, in addition to any immediate gift tax issues, your child would lose the step-up in basis she’d get by receiving the property on your passing. Consider this. Let’s say you bought the house at $400K, and it’s currently worth $600K. You pass away in 2020, when the property is worth $800K, and she sells the house immediately for $800K. If you transferred the property on death, through a trust, she would pay no capital gains because she would have assumed ownership at $800K. However, if you grant her an interest now, at $600K, she’d have to pay capital gains tax for the increase to $800K. It’s far better, and safer, to pay a competent attorney to create a trust that would protect your property for yourself while you’re alive, and for your child on your passing. If you’d like more information on this topic, contact a local estate planning attorney for a free consultation, and good luck!