Should I put my home in joint names with my kids?

I am always surprised at the large number of people who put their homes in joint names with their adult children. If only they could see that transaction from a lawyer's perspective! When I ask people who advised them to do this, the majority reply that they did not use professional advice.

Before you decide to add your children's names to the title to your home, consider this: the child whose name you put on the title will own your house just as much as you do. It won't matter in most circumstances that it's "really" your home or that you're the one who paid for it. Think about what that could mean to you.

Risk #1: You put your son Frank on the title to your home. A few years later, Frank gets divorced. He and his wife divide their property between them as fairly as possible. She claims half the value of your house. Because Frank is the owner of the house too, she actually has a viable claim. Does Frank have enough assets to give his wife an amount equal to half the value of your house? If so, what will that do to Frank's financial picture? What happens if he doesn't have enough to pay her out? You risk at worst losing your home, and at best leaving Frank a couple of hundred thousand dollars poorer.

Risk #2: Frank opens a business of his own. He gets bank financing, and as is usually the case, he signs a personal guarantee for the loan. After a while he realizes that his business is not working out, and he closes up shop, owing the lender much more than his business is worth. The lender has the legal documentation that allows it to realize on Frank's personal assets, which includes your home. If Frank can't pay off his business debt, are you in a financial position to bail him out to save your home?

Risk #3: Frank is driving too fast and causes a motor vehicle accident in which someone is severely injured or killed. The settlement amount is in the millions of dollars. Frank has only $1,000,000 in public liability insurance. He is sued for the rest. It's going to take everything he owns, and more, to satisfy this judgment. Since he owns your house, it could well be seized and sold to help pay off the judgment.

Risk #4: You and your spouse decide that the old family home is too big and that it's time to downsize to a condo. You're ready to put the house on the market, but Frank won't sign the Transfer of Land. He believes that the housing market is too low right now and just might recover if you hang on for a year or two. You and your spouse won't be able to sell your home because the other owner, Frank, isn't co-operating.

I could go on, but I'm sure you get the point.

The bottom line is that it's risky to put names other than your spouse on the title to your home. It is usually one of the most significant assets on anyone's financial sheet and not something that most people can afford to have taken away.

So why do so many people take this risk? Usually it's because they have been advised to avoid probate fees by putting everything in joint names. It seems like a good idea as long as you're willing to avoid thinking about the potential downside. In my view, people take this step knowing too little about the process itself, and too little about how it actually applies to them.

For example, in Ontario and BC, probate fees are quite high and it's understandably tempting to find ways to reduce those fees. But why would anyone in Alberta, where probate fees cannot exceed $400 no matter how large the estate, want to reduce probate? Who would risk a $500,000 asset to save $400? It's often because they don't know the fees are that low and added names to the title without ever finding out how it applies to them.

If you are considering putting your child's name on the title to your home, you need to get professional advice that is geared towards you personally by someone who has all the facts about you, your children, your assets and your liabilities. This could be an estate planning lawyer or a certified financial planner. While it is certainly legitimate to consider this step as part of estate planning, make sure it's also kept within the larger context of your risk.

10 ways to prevent elder financial abuse

From everything I've read and seen lately, from studies to news headlines, it appears that financial abuse of older people is on the rise. Financial abuse includes everything from scams run by strangers to theft by family members. In some cases financial abuse leaves the senior with insufficient funds to pay for safe, clean, appropriate living circumstances. In all cases, it's a source of terrible stress for the senior and his or her family.

There are some steps that seniors can take to prevent and stop financial abuse, and I've listed ten such steps in this post. Feel free to add others if you like. In a future post, I'll talk about steps that other people in the senior's life can take.

1. Keep financial information as private as possible. Never give out personal or financial information on the phone. Shred your bills or bank statements when you are done with them. Don't leave cheque books, statements, bank cards etc lying around the house.

2. Have an unlisted telephone number. Register your phone number on the national do-not-call registry. These two steps should help reduce the number of strangers calling you.

3. Don't sign any sales agreements or other documents unless someone you trust has looked them over. Don't buy any services from door-to-door sales people or telephone solicitors no matter how good the deal sounds. Always talk about possible major purchases with someone you trust before going ahead.

4. Don't believe anyone who says you have to pay money to claim a prize. This is a very common scam.

5. Stay organized. Keep orderly records of your bank accounts, investments, house title, tax payments, GST rebates, pension cheques etc. Once a month, go over everything for a few minutes, just to make sure that all of the usual sources of income have come in, that all bills are paid and nothing out of the ordinary is going on. If this is simply too much for you, hire an accountant from a reputable firm to help you, or if that is too expensive, open a custodial type of bank account that takes care of those transactions for you.

6. Avoid joint bank accounts, either with your children or with a caregiver. It is a myth that a joint bank account is a good idea to allow someone to help you with banking, and they can cause huge headaches. Use a Power of Attorney instead. It is not expensive to have one made up, and it keeps your money in your name only.

7. Get your legal affairs, specifically a Will and Enduring Power of Attorney, in place. Be smart about who you choose to give all of this legal power to. Don't name someone as your executor or attorney if you are not 100% sure that you are comfortable leaving all financial decisions in their hands. Look at their financial situation too. If they are in dire straits, perhaps it's not a good idea to give them signing authority over your life savings. If you don't have someone close by that you trust, call a trust company to see if they will act as your representative.

8. Ask your lawyer to build some accountability clauses into your Enduring Power of Attorney. Make sure the person you name as attorney has to give financial documents to someone else (perhaps another family member, your accountant, your lawyer etc) on a regular basis. This is often enough to ensure your representative doesn't help himself or herself to your money.

9. Avoid becoming isolated. Take a class, exercise at a seniors' centre or join others at the library on a regular basis. Make in-person trips to the bank. Being alone all or most of the time makes you a prime candidate for being abused, because nobody else is there to notice or to offer help.

10. Trust your gut instinct if you feel that something is wrong. Ask for help. Call the authorities if necessary. If you think a caregiver, contractor or business person is double-billing you or otherwise fraudulently taking your money, ask your children or a senior's advocate for help. If a caregiver or one of your children seems to be stealing from you, call a lawyer you trust or a senior's help line. If you think money is missing from your bank account, talk to the bank manager to find out what's going on. Most large cities have an Elder Abuse Team as part of their police service, and these officers are there to help you. Many cities also have seniors' associations that are set up to help, educate and support seniors.