Daniel and Diane, a husband and wife, had lake front properties in their family for generations. They wanted to hand the properties down to their daughter Melissa and her siblings as an early inheritance. Daniel and Diane gifted individual lots to each of their children, titled in their child’s name alone. However, Melissa’s husband Patrick was upset that his name was not going to be put on the title. Melissa asked her parents to put Patrick on the title, which they did.
Sadly, Melissa’s marriage to Patrick ended and she filed for divorce. In the divorce, Patrick claimed that the lake front property was at least one-half his property because his in-laws put the tile in his and Melissa’s name, or at least that Melissa gifted him the property when she told her parents to put his name on the property. If the property was his, or was deemed to be marital property, then it would be subject to division in the divorce proceedings and Melissa could be forced to sell it or give it to Patrick. The dispute went all the way to a trial and the divorce court awarded the property to Melissa as a separate property, not part of the division of property in the divorce. Patrick appealed though, and the Court of Appeals said there was an ambiguity as to whether Melissa gifted the property to Patrick. More than two years later, the saga continues in court.
A rising trend in the estate planning world is for individuals to make lifetime gifts of assets rather than to make gifts at death through a will, trust, or beneficiary designations. With the current federal estate and gift tax exemption being $11.7M per person, many baby boomers are deciding to make gifts during their lifetime so that they can witness their family member’s enjoyment of these gifts. Maybe that is what Melissa’s parents were doing in this case. It is difficult to predict when relationships will end and under what circumstances. Melissa’s parents probably did not expect their act of generosity would create such a nightmare for their daughter and their family. Is there anything they could have done differently?
By making the gift during their lifetime and transferring title to the property to Melissa and Patrick outright, Daniel and Diane lost control over the property. They gave up their legal rights to decide how the property is used and who gets to use it. Hindsight is 20/20, but one simple solution would have been for Melissa’s parents to put the lake property into a trust. The trust could have been part of their estate plan and it could have spelled out exactly what they wanted to happen with title and ownership and use for generations. A trust could have protected the property from any claims in a divorce, and Patrick would have had no claim to the property at all. If Daniel and Diane were trying to remove the property from their estate for tax purposes, they could have used a certain type of trust to accomplish that goal, and still would have been able to protect the property from risk of loss in a divorce down the line.
Attorneys at Reminger confront these issues daily and advise clients on navigating these difficult situations. If you have questions or concerns about your estate planning and planning options, please contact a member of our practice team.
Allison focuses her practice on elder and special needs law, including estate and long term care planning, estate and trust administration, probate and guardianships. She serves as the Chair of both Reminger's Elder Law and Special ...
Tim is a shareholder in Reminger's Cleveland office. He focuses his practice on probate litigation. In this capacity, he leverages his jury trial experience to provide representation in probate and trust disputes involving will ...
- In Brief: Ohio Estate & Probate Litigation Updates November 2021
- Consult Attorney When Considering a Financial Gift
- Taylor Smoske Joins Reminger's Estate and Probate Litigation Team
- P. Nicholas Sebastiano Joins Reminger's Estate and Probate Litigation Team
- Reminger Named a Tier 1 Firm for Trusts & Estates by U.S. News – Best Lawyers® “Best Law Firms” in 2022
- Be Careful What You Gift For
- In Brief: Ohio Estate & Probate Litigation Updates October 2021
- Adam Fried Testifies to the Ohio House Civil Justice Committee Regarding Remote Witnessing of Wills
- 2021 Recap: Ohio Legislative & Case Law Updates
- Reminger Estate & Trust Attorneys Recognized in 2022 Edition of The Best Lawyers in America®