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Caution: Don’t Give an Unintended Gift

On Behalf of | Dec 14, 2010 | Estate Planning |

By Cameron M. Morby, Associate–The holiday shopping season has officially begun. Not many days ago, “Black Friday” commenced the holiday shopping season. The box stores, boutiques and bazaars are filled with shoppers ranging from the calm to the frantic in the quest to find the perfect gift. With gift giving on everyone’s mind, it seems appropriate to discuss a gift that is made by many people not only at Christmas time and which is not sold at Target, Amazon or Best Buy. The gift I am referring to is the unintended gift.

What is an unintended gift and what are the consequences? An unintended gift is made frequently at a bank, the county recorder’s office or via a brokerage account. For example, in an effort to assist an aging parent, a child is named as a joint account owner on a bank account or placed on title to real property through a quit-claim deed, to ensure that mom or dad will be taken care of and their property properly managed. Although the intent is honorable, the consequences can be devastating.

A potential adverse consequence of making an unintended gift can result in disrupting an overall estate plan. For instance, if a parent has executed a will that divides her property equally among her three children but places one child as a joint owner on all of her property, then at death the law declares the joint surviving property owner to be the legal owner of the property despite the will directing a difference result. In addition, an unintended gift can have adverse tax consequences including gift tax liability for the person making the gift and losing out on the cost of basis adjustment for property owned at death. Finally, making an unintended gift to a child can subject the property given to the child’s debtors and creditors.

It is the season of giving; just make sure to avoid making an unintended gift which ultimately may be received by an unintended recipient.