Planning for the future is important, and many parents consider giving their assets to their children during their lifetime, often based on well-meaning advice or hearsay. Some do it to avoid probate, reduce estate taxes, or qualify for government long-term care benefits. However, transferring property directly to children instead of using a trust can create serious and unexpected problems.

Many parents believe that if circumstances change later, their children will willingly return the property. But once a gift is made, the legal ownership is transferred completely. Even if the parents regret the decision or need the property back, they have no legal grounds to reclaim it.

You may have absolute trust in your children, believing they are devoted and responsible. But money can change relationships. Once the asset is in their name, they can sell it, waste it, or lose it due to lawsuits, debts, divorce, or even the influence of a spouse. You could easily find yourself with no legal rights to what used to be yours.

In some unfortunate cases, the child may become incapacitated from an accident or illness, or pass away before you. In such scenarios, a daughter-in-law or son-in-law could end up with full control of the asset. Ask yourself: would they really return it to you?

Some parents attempt to avoid probate by adding their child’s name to the deed of their home as a joint tenant with right of survivorship. While this may bypass probate upon the parent’s death, it introduces other risks. If the child becomes incapacitated while still alive, the property may become subject to a living probate (guardianship proceedings), a legal and often emotionally draining process.

The most secure and flexible way to protect your assets and your family is through a Living Trust. This allows you to:

• Transfer your assets to the trust during your lifetime
• Name your children as trust beneficiaries
• Maintain control over how and when your children will receive their inheritance
• Avoid probate altogether
• Protect your assets from your children’s creditors, lawsuits, divorces, or financial mistakes

Trusts also help avoid capital gains taxes. With a trust, you can even specify the timing and conditions under which your children receive their inheritance. In other words, you can make sure your wishes are respected, even after you’re gone.

Some people believe that they can simply give away their assets to their children and apply for Medicaid. But Medicaid has a five-year look-back period. Any gifts made within five years of applying can result in penalties and delays in eligibility, possibly forcing families to exhaust their savings before receiving any benefits.

Planning for long-term care requires a different legal strategy. A Long-Term Care Asset Protection Trust, distinct from a Living Trust, must be set up well in advance. This type of planning should be done with the guidance of an experienced elder law or estate planning attorney who understands both the legal and financial implications.