Reasons Not to Put Your House in Your Child's Name.
People often consider putting their house in their child's name. They may be trying to avoid paying for long term care or probate. Don't do it, it's taking a big risk! There are many potential pitfalls to putting your kids on the deed to your home.
Remember, when your child's name is on the deed, not only is he or she an owner but so is his or her spouse. Approximately 50% of marriages end in divorce. Your house would be an asset that could go to your child's spouse which would make them your landlord or worse. Similar risks hold if your child predeceases you. Your child's ownership interest and control could pass to their heirs.
Your child could become disabled and need long term care. Again, your house would be considered an asset that could be used to pay for that care.
Your house, which would be your child's asset, would have exposure to your child's creditors. If your child has tax problems, a tax lien could be filed against your house. If your child files for bankruptcy your house may have to be sold. Your house could be attached if your child is sued because of a motor vehicle accident.
If your child's name is on the deed and you want to move and sell the house, you will need their permission. Remember, it is their house. In fact, your child could sell his or her portion of the house without your consent.
Your kids could raise money by taking out a mortgage on the house. If they don't pay the mortgage, the house could be subject to foreclosure.
Your children may be subject to much higher taxes if their name is on the deed to your house. If they inherit the house at the time of your death, the taxes they owe will be based on the value of the house when you died. When they sell the house the capital gains tax will be based on that value. If their name is put on the deed while you are alive and they sell the house after you die, the cost basis of the house will be what you purchased the house for. They will be taxed on the appreciation of the house while you owned it. This difference in taxes they owe at the time of selling the house can be huge.
Putting your child on the deed to your home can be a very costly mistake. A good estate plan is essential, make sure it works the way you want it to. Contact Shoffner & Associates for any estate planning questions, issues, or concerns.
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Freya Allen Shoffner, Esq.
Shoffner & Associates
Counselors to Small Business and Families.