When a parent gives property to an adult child, the parent confirms the purpose. Was it a gift? Was it given to support the child? Or was the child intended to use it to manage the parent's financial affairs? When the reason is unclear, this can cause painful and expensive rifts among children.

Courts presume that property given to an independent adult child by his or her parents is not a gift. Instead, the child is considered to be holding the property in trust for his or her parent and that parent's estate. When the parent dies, the property is included in the parent's estate and distributed according to his or her Will.

Parents often add a child's name to the parent's bank account for several reasons. While the parents are alive, joint bank accounts make it easy for children to help manage their parent's finances. Jointly held accounts are also a way to avoid probate tax when a parent passes away. However, when the parent dies, courts will usually presume the balance in a jointly held account was not intended to be a gift to the child.

A child can prove otherwise by showing his or her parent had a clear and unmistakable intention to gift the property. To determine the parents' intention to transfer an asset like a joint bank account, courts consider: evidence of the parent's intention before the transfer; wording of the banking or financial documents; control and use of the asset; terms of any power of attorney granted by the parent to the child who co-owns the bank accounts; and tax treatment of the account. But, the intention may be difficult to prove especially if: the gift is not documented well; there was no pattern of gifting by the parent; the child appears to have unduly influenced his or her parent; or the parent lacked mental capacity.

Unlike independent adult children, courts presume that when a parent gives property to a dependent adult child, this is an outright gift. Parents have an obligation to support their dependent children. This legal obligation continues after a parent dies. If a parent consistently supported his or her dependent child before the parent's death, the child can ask a court to order the parent's estate to continue that support. In addition, if a parent had the means to provide his or her Will for a dependent adult child but did not, and the child has a reasonable expectation of support, a court may find that the parent's estate has a moral obligation to support the child.

What should you do if you want to transfer property to your adult child?

First, seek legal and tax advice. You should always speak with a trusted advisor when transferring property, even if it is to your child. Your advisor can help organize the transaction in the most efficient way possible.

Second, record your intentions. A legal advisor can help you document the transaction to reflect your intentions and your best interest.

With careful planning and clear documentation, parents can avoid costly and protracted disputes among their children after the parents pass away.

They can also ensure that their intentions will be understood and respected, whether they want to gift properly to a child or to use a joint ownership to ensure easier management of their estates and to avoid probate tax and have the asset held in trust for their estates.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.