Should I modify my house and beach property titles?

You have several options available. For instance you can put the property into a trust, title the property as a Life Estate, or title the property as Joint Tenancy with Right of Survivorship. There are advantages and disadvantages to all of these. To help you with the decision, I strongly recommend you contact an estate planning attorney in your local area who is familiar with the laws of the states where the property is located.

There is no Maryland inheritance tax for items passing to children so that's not reason to do it. You would avoid probate but exactly how you do that should be directed by a lawyer. I earn lot's of money from heirs helping them straighten out mistakes made by their relatives who decided they could do it on their own. I urge you to contact a lawyer who can explain your options.

I agree with the previous posting, but will add that you should consider taking your husband's name off title, which would generally be done by recording an affidavit of death of joint tenant, though the precise document used in Maryland may be different.

Also, you should consult an estate planning attorney about the decision to put your son's name on title. This is not an innocuous decision, it is a gift of an interest in the property and means transferring a present interest in each of the properties to your son. You will probably need to file a Federal Gift Tax return for the transfers, though, unless the properties are worth more than $1,000,000, there should be no Gift Tax actually payable.

You must also consider whether any transfer of an interest in the beach property would trigger a due on sale clause in your mortgage. If so, you should obtain the lender's written permission to make the transfer before doing so.

Transfer of an interest in your properties to your son also means that your son's creditors, whether he falls into debt or has a large judgment entered against him (as for instance in the event he is involved in an auto accident for which his insurance is inadequate) may levy on and take his interest in your properties. Further, if for some reason you ever change your mind about having these properties pass directly to your son, you will need his cooperation to deed his interest in the properties back to you.

Note also, that once you have transferred interests in your properties to your son, that he will be free to sell his interest in your properties and probably has the right under local law to cause the properties to be sold in order to liquidate his interest in them. If your son becomes incompetent as the result of accident, stroke or other injury, these rights could be exercised by his spouse acting as his guardian or conservator.

You should also know that when you gift property, the recipient of the gift, the donee, takes your tax basis in the property. If your son receives the properties from you as a gift after your passing through a will or trust, however, the tax basis of the properties would be increased to their fair market value at the date of your passing, (2010 excepted).

Any kind of present transfer of an interest in real property as an estate planning tool is generally inadvisable because the transfers once made are hard to undo and can have unexpected, unwelcome consequences as noted above. You would be well advised to consider using a living trust to transfer the properties to your son, which would also avoid probate.

Finally, you will not avoid Federal Estate taxes by gifting an interest in your properties to your son during your lifetime because, as noted above, there is also a Federal Gift tax. There are devices, however, such as a qualified personal residence trust (a QPRT) which could be used for either of your properties in order to transfer ownership in them to your son at a much reduced tax rate, depending on how the QPRT is structured.

Please be advised that the foregoing discussion is a generalized and hypothetical answer based upon incomplete facts and is not intended to serve as legal advice to you, nor should you regard it as an attorney-client communication or as creating an attorney-client relationship. If you desire legal advice concerning the situation you have described you should contact an attorney who has substantive experience in the fields pertaining to your question.