Should You Add Your Adult Children to the Deed to Your Home?

For some reason, a lot of people want to add their adult children onto the deeds of their homes. I must talk to a client about this at least once a week.  People generally have different, specific reasons they want to do this. But if you take away all the fluff, it generally boils down to one thing—they want their kids to end up with the house when they die.

But is adding your children onto the title of your home the best way to do this?  Well, I can’t say it’s never a good idea. There are a few situations where it may be the best way to go.  But more often than not, there is a better solution.

So why is it not a good idea to add your adult children onto the deed to your home?

1.  Your child may want to get a mortgage to purchase real estate and being on your deed could hinder that process.  By way of example, I am currently working on having my client’s adult son’s name removed from two of his properties because the son is trying to finance his own home.  The lender has requested proof that the son is not a co-owner on the other homes.
2.  When you go to sell your home, everyone who is on the deed will need to sign paperwork for the transaction.
3.  If your adult child is on the deed and lives with you, and he or she is married, his or her spouse will also need to sign paperwork to close the sale of your property.
4.  if you refinance, everyone who is on the deed will have to sign off on paperwork for the refinance.
5.  Technically, the house won’t be all yours anymore. If you have any difficulties or family problems, your kids could lord their partial ownership of the house over you.  About a year ago, I had a client whose wife passed away. Their home was in her name and their son’s name. The son and his father did not get along and within days of the mother’s passing, the son threw his elderly father out of the house.
6.  After your death, if your kids go to sell the house, they may actually end up paying capital gains tax on a property they otherwise could have inherited without having to pay any tax. Why? Because if you add your kids to the title, their basis in the property is the same as your basis. On the other hand, if they actually inherit the property after your death, their basis in the property is the stepped-up value of the home, based on when they inherited it.
7.  If your child is married, depending on (a) how the tenancy of your home is set up and (b) who your child’s heirs are or who he has nominated in his will, your child’s spouse or other heirs could potentially end up as your co-owner(s).

There are many other options available to people who want to ensure that their home goes to their children when they are gone. These options involve some estate planning – – for example, the transfer can be done via will, trust, land trust, or TODI.  A qualified estate planning attorney can help you figure out which option is best for you and your family.