Frankly, there are many reasons why you should not add your child’s name to the title of your real estate.
As you or your parents age, it may seem like you can simplify the process of dividing things up by adding your children or having your parents add you to things like the car title, mortgage, or the deeds on other properties. However, that can have negative tax implications if you are not planning to keep those assets, and sometimes even if you are.
If you have siblings or more than one child, this is a bad idea. Why? Because unless the child you added to the mortgage plans to stay there and live in the home, then most likely the child who has been added to the mortgage is going to sell it and split the money between himself and his siblings. The other complicating factor is when a child is added to the mortgage. If they are added when both parents are alive, then the interest in the home is different than if they are added just before the passing of one parent.
In short, there are better ways to accomplish your desired goal, avoid probate and avoid potential capital gains for beneficiaries.
Rather than adding a child to the title of your house, creating a comprehensive estate plan can ensure your assets are passed along in an equitable manner and that one child is not overly burdened with the issue of federal taxes. Even if an individual is facing a condition like Alzheimer’s, where they must make plans in the case of an illness, setting up a springing or durable power of attorney helps circumnavigate these events much more easily than simply transferring assets that will get taxes heavily later.
Over the past 31 years, the Law Offices of Christopher A. Benson has helped more than 800 clients prepare and utilize simple and effective planning techniques to protect them and their families in order to avoid probate, save estate taxes, save money and save added emotional burden that comes from long term illness and/or death of a family member. Give us a call to schedule a free consultation to find out how we can help you and your family.