Can I Add Children’s Names to my House Deed?
There are many ways that this simple strategy can go very wrong, very quickly. If one of the joint owners is sued, or files for bankruptcy, the home is vulnerable, reports a recent article titled “Naming a child on your deed to avoid probate? Here’s why you may want to reconsider” from St George News.
That’s just the beginning.
As any estate planning attorney will tell you, things change when significant assets are involved. Your son or his new wife may decide they don’t want you to rent, sell or refinance your home. They have the power as co-owners to stop you from doing anything with the house. All they have to do is refuse to sign the paperwork.
If one child is on the deed and you and your spouse both die, the one child owns the house outright. If there are other siblings, no matter what your will says, the siblings have no legal right of ownership. Your other children will need to go to court and will likely not win.
If all of your children are named as co-owners with you and your spouse on a deed, your and your spouse’s portion will still be subject to probate.
Naming multiple children as joint owners on a deed also opens you up to more exposure. Even if your children are model citizens, things happen, including divorces, auto accidents, bankruptcies and other unexpected events. Business owners who run into problems can spell disaster for a family-owned asset of any kind. The more siblings with ownership interests in the home, the more risk.
Also, if your children own homes of their own over which there is a Louisiana homestead tax exemption, you would lose the homestead tax exeption on your home. Additionally, merely gifting your home to your children can result in a big income tax bill to your children if they sell your home after you pass away.
Occasionally, I can recommend a client to transfer their home and retain a “usufruct for life” over the home. This can eliminate certain income tax issues after death, can avoid probate, and can potentially minimize medicaid assets subject to medicaid estate recovery (assuming certain other things happen, which your attorney can’t control). But it is not a perfect strategy, particularly if clients have any other assets besides a house. The asset protection issues with this type of an approach will always linger until your death.
As is often the case, when people decide they have found a simple solution, complex problems follow. The lawsuits resulting from the situations described above are common, expensive and can cause families to break apart. Your estate planning attorney can explain how an estate plan, with proper ownership, possibly a trust and other legal strategies, will achieve the desired goals without putting the estate and the family’s relationships at risk.
BOOK A CALL with me, Ted Vicknair, Board Certified Estate Planning and Administration Specialist, Board Certified Tax Law Specialist, and CPA to learn more about estate planning, incapacity planning, and asset protection.
If you liked this article, “Can I Add Children’s Names to my House Deed?” read these additional articles: Can Grandchildren Receive Inheritances? and Do You Have to Pay Taxes on Inherited IRAs? and Must I Sell Parent’s Home if They Move to a Nursing Facility? and When Can Estate Assets Be Distributed?
Reference: St George News (Jan. 30, 2022) “Naming a child on your deed to avoid probate? Here’s why you may want to reconsider”