Why You Shouldn’t Put Your Children on Your House Deed

As parents, it’s natural to want to ensure your children’s financial security and make the inheritance process easier for them. One common strategy some homeowners consider is adding their children to the deed of their home. While this may seem like a simple solution to avoid probate and transfer property seamlessly, it can lead to a variety of legal and financial complications. Here is why you should think twice before putting your children on your house deed.

1. Loss of Control Over Your Property

Once you add your children to your house deed, they become legal co-owners of the property. This means you cannot sell, refinance, or make major decisions about your home without their cooperation. If you later decide to sell your home, you will need their agreement, and any proceeds from the sale must be split among all owners. Also, if any of your children that you include on the deed are married or even become married after adding them to the deed. Your married child’s spouse will also have to cooperate.  Losing sole control over your home could seriously limit your options and ability to make decisions for your home in the future.

2. Potential Tax Consequences

Adding your children to your deed can trigger unintended tax consequences. If they receive an ownership interest in the home as a gift, they may be subject to gift taxes depending on the value of the transfer. Also, when they eventually sell the property, they may face a significant capital gains tax burden because they do not receive the step-up in basis that would apply if they inherited the home after your passing.  

3. Risk of Creditors and Liens

If your child has financial troubles, their creditors could place liens against the home or even force its sale to satisfy debts.  This is especially concerning if your child has unpaid taxes, legal judgments, or faces bankruptcy. Unless they live in the home with you, they do not benefit from homestead protection that you  have as the home’s occupant.  By adding them to the deed, you expose your home to risks that could otherwise be avoided.

4. Medicaid and Long-Term Care Eligibility Issues

If you need to apply for Medicaid to cover long-term care expenses, transferring ownership of your home to your children could create eligibility issues. Medicaid has a five-year “look-back” period in which asset transfers are scrutinized. If you have added your children to your deed within that timeframe, you could be penalized or disqualified from receiving benefits, forcing you to find alternative means to pay for care.

5. Family Disputes and Relationship Strain

Property ownership can sometimes lead to family conflicts, especially if multiple children are added to the deed. Differences in opinions about selling the home, making repairs, paying for other expenses, or dividing inheritance can create tension and legal battles among siblings. Additionally, if one of your children goes through a divorce, their ownership interest in your home could become part of their marital assets.  Instead of simplifying the transfer of your home to your children, adding them to the deed could cause significant complications and family unrest. 

6. Alternative Estate Planning Options

Instead of adding your children to your house deed, consider other estate planning tools that provide a smoother transition of property without the risks. A revocable living trust can provide significant protection for your home and allows you to retain control over your home while ensuring it passes to your heirs without probate.

Final Thoughts

While it might seem like a good idea to add your children to your house deed, the potential risks often outweigh the benefits. From loss of control and tax implications to creditor risks and family disputes, this decision can have serious unintended consequences. If you’re looking for ways to secure your children’s future and avoid probate, consult with an experienced estate planning attorney at Gibby Law Firm. We can guide you through safer, more effective strategies to help protect your assets and provide for your loved ones.