Sounds obvious, right?  Well, this concept is not as obvious as it seems.

Yesterday I wrote about why having your children's property in your name can cause you serious problems.  Today I write about the opposite problem: putting your property in your children's names.

Sometimes people put the title of property, such as their home, in their children's names.  That saves big problems for the children when the parents pass on, right?  Actually, doing this can have the opposite effect while the parents are still alive, and can cause serious problems no matter what the reason was for doing it.

A man I'll call Joe came to me wanting to file bankruptcy.  He had lost his high-paying job and was now working for $12 an hour.  While he was working for high wages, he spent what he could afford and built up considerable credit card debt in doing so.  Now that he was no longer earning high wages, he could not afford to pay his credit card bills.

Meanwhile, Joe's parents had paid off most of their home mortgage and put the house in Joe's name in order to avoid probate.  Their house had about $250,000 equity, the vast majority of which could not be protected in bankruptcy.  (See Protecting Your Property From Liquidation on this page of my website.)  If Joe had filed bankruptcy, his parents' house could have been taken in order to pay Joe's credit card debts.

This tale has no happy ending.  Joe is now stuck trying to deal with his creditors, who are demanding their money and suing him for it.  Joe will not risk his parents' home by filing bankruptcy, so he has to deal with the consequences of his debts without bankruptcy protection that could have eliminated them.

Like yesterday's post, this one is not intended to tell you what to do or not do.  It is merely here to help you make an informed decision.  Before placing property in your children's names, you should know that if your children get into financial trouble, that property could be available to your children's creditors.  There are better ways to avoid probate, such as a living trust.  You should consult a Wills & Trusts or a Probate attorney before making any decisions on matters like these.