“Bootleg” Asset/Estate Planning

Posted By : admin
Category : Estate Planning
17 - Jun - 2016

At Halcomb Singler, LLP, we have a highly technical term that we use to discuss “asset protection planning” or estate planning techniques we see that our clients implement prior to seeking the advice of an attorney.  We call it “bootleg estate planning.” Sometimes it hasn’t caused any problems for our clients and other times it is going to cost them (or their families) hundreds or thousands of dollars to fix.  Sometimes we can’t fix it and the damage is done.  So, before you decide to google how to handle your legal needs, we thought we should blog about what we consider to be common bootleg estate planning techniques and why you should consult an attorney first.

One technique that we see often is the addition of another name to an asset, such as a vehicle or a house.  For example, a mother might add her two children to her home by filing a quit-claim deed and adding her children to the deed or simply deeding the house to her children outright.  There are  A LOT of potential problems with both adding someone else’s name to an asset as well as giving it to them now.  One problem is that those pesky legal documents are really important because who they say owns the house or car is actually who owns the house or car.  There really is no such thing as “owning something on paper.”  We use that phrase because we have head it a lot, not because it has any legal significance whatsoever.  If another person owns something because you added their name to a deed or a title and they have an issue with a creditor/collection, then it is possible that the creditor may be able to foreclose on the house or ask the court to order the car sold to pay a judgment.

Another potential ramification for “putting other people on your house” is that you or they might lose the property tax deduction for homestead exemption.  For example, if you have claimed the homestead deduction on your primary residence and then you deed the house to your children, chances are good that at some point you will receive a notice from the county with a huge tax bill because either: 1) your children don’t live there or 2) your children are already claiming a homestead exemption at another address.  Either way, significantly more property taxes are going to be due.

An especially sad result of bootleg estate planning might occur when a parent adds an adult child to her bank account to avoid probate.  When the parent dies then the adult child is the new legal owner of the funds in that bank account.  However, what the parent may not realize is that his or her other adult children do not get any of that money.  Since the bank account is a non-probate asset, it is not subject to be divided between her adult children and unless the adult child who received the funds is being generous, the adult children who weren’t on the bank account are going to be left with some hurt feelings.

Bootleg asset protection/estate planning is no defense in Court.  “I didn’t know” is not a legal defense.  While this may sound harsh, it is also legal reality, so think twice before whipping up a quitclaim deed, adding a person to your bank account, setting up a trust (yes….we have seen a person set up something that they said was a “trust”), or generally attempting to plan for asset protection or estate planning without the advice of a qualified attorney is not advised.  In some instances people might lose their home or vehicle and in other instances, a qualified attorney may be able to fix the situation, but only after significant expense to the client.

It is certainly possible that an attorney at Halcomb Singler, LLP, may advise you to take a step in asset protection or estate planning that includes filing a quit-claim deed for your house, adding someone to your car, filing a payable on death form with your bank, changing a beneficiary designation, or many other options.  However, our attorneys are educated and licensed in Indiana to practice law and are looking at the big picture regarding legal ramifications of taking such actions.  The fact is that changing one fact may change everything as far as our advice is concerned.  So, do yourself a favor and seek the counsel of an attorney before engaging in bootleg asset protection or estate planning on your own.  It often makes a lot of sense to spend some money now to have an attorney review your situation and set up an estate plan rather than have a lot of surprises and likely higher attorneys fees later.

Halcomb Singler, LLP, offers flat fees in the area of estate planning.  Our attorneys will meet with you to find out more about the facts of your life prior to proposing how to best effectuate your estate plan.  By consulting with an attorney regarding your estate plan now you may save yourself and your family lots of time, money and heartache in the future.  If you live in Indianapolis or Central Indiana and would like to discuss estate planning please contact Halcomb Singler, LLP, at (317) 575-8222.  Our office is conveniently located on Main Street in Carmel, Indiana.