Dear Len & Rosie,

My wife and I are both in our 50's. We are in the middle of buying a new home, and we plan to retire in a few years. We do not have a trust, and our wills are fifteen years old and out-of-date. Our net worth is now about $1.65 million. How should we hold title to our new home? We don't think we should want our two children on the title at this time.

Dan

Dear Dan,

You have good instincts. It is almost always a bad idea to add your children to the title of your home. If your children are on title and you ever want to sell your home or borrow against it, you'll have to ask them, hat in hand, to sign your home back to you. They may refuse. Even worse, if one of your children goes bankrupt, gets sued, or owes back child support, you may wind up with liens on your home of which you can be sure your children will not help you remove.

Sometimes it is useful to transfer property to children, or into irrevocable trusts in a child's name as trustee, especially if you are on Medi-Cal benefits or will likely need long term nursing home care. But it is important to understand that giving your home away means giving up control of your most important asset. This is not something to be undertaken lightly, and should be done only when you are willing to allow your children to make the decisions.

You and your wife should probably title your new home as "husband and wife, as community property with right of survivorship." This will allow your home to avoid probate and benefit from a full step-up in cost basis on the first death of you or your wife. But that will not avoid probate on the surviving spouse's death. You need a trust to do that.

If the total value of the surviving spouse's estate is worth the $1.65 million that the two of you own total, a lucky trusts and estates attorney is going to earn a probate fee of $29,500. Probate fees are set by statute and are based on the gross value of the decedent's estate (before loans and expenses are subtracted). And most of the time, the estate's attorney will also earn "extraordinary" fees, for doing "extra" work such as getting a court order authorizing the sale of your home during the probate. Creating a trust now will be more expensive than making new wills. But since assets held in trust avoid probate, your children will save both time and money after you and your wife pass away.

Len & Rosie

Len Tillem and Rosie McNichol are elder law attorneys. Contact them at 846 Broadway, Sonoma, CA 95476, by phone at (707) 996-4505, or on the Internet at www.lentillem.com. Len also answers legal questions each weekday, 3-4PM on Newstalk910AM.

Tillem McNichol & Brown