Q: Should I add my child to the title of my home?

by | Jun 8, 2022 | Estate Planning, Q&A, Title and Deeds |

A: Here are 7 reasons NOT to add your child to the title of your home:
1. CAPITAL GAINS TAXES. Your child will lose the full step-up in tax basis upon your passing, which could cost the child significantly in tax liabilities upon an eventual sale of the property.
2. FORCED SALE (Part 1). You could be forced to sell your house if a judgment is obtained against your child or if the child files for bankruptcy.
3. FORCED SALE (Part 2). If there is a mortgage on the house, the transfer could trigger the “due on transfer” clause on your deed of trust, which could force a sale or refinance of the house.
4. LOSS OF BENEFITS (Part 1). If your child does not live at the house, he or she may lose his/her Medi-Cal eligibility or other means-based governmental assistance such as SSI.
5. LOSS OF BENEFITS (Part 2). Your child may lose the ability to qualify for first-time homebuyer’s assistance programs.
6. LOSS OF OWNERSHIP. If your child severs the right of survivorship on the joint tenancy (*which can be done WITHOUT your consent) and then predeceases you, the child can leave the house to whomever he or she wants. Thus, you may not only lose your 50%, but also have a very undesirable co-owners moving forward.
7. LOSS OF CONTROL. What if you want to sell or refinance and your child refuses? Although a successful partition action would force the sale of the house, you would still only be entitled to 50% of the net proceeds.