Many people believe that it is a smart idea to add their children on the deed to their home for inheritance purposes. Generally, the reasons for this are honest in nature. In the majority of cases, people want to help their heirs avoid probate or inheritance tax and think adding the child’s name to the deed is a form of asset protection. Sometimes they may also want to put their child’s name on a house deed to prevent the sale of the home to pay for assisted living expenses.
However, this is an action that nearly always causes more problems than it solves. An established estate planning attorney would never suggest adding the names of children on to a deed, and this is why.
Once you put your child’s name on the deed, you cannot reverse this easily
It is a common belief that somebody can simply be “removed” from a deed, but this is not true. Even in the event that there is an “original” owner of property and this owner added a name(s) to the deed for any reason, that original owner may not then later remove the additional name(s).
This is due to how property rights work. The moment the “original” owner added the extra names, those new names now have equal rights to the “original” owner. Thus, the only way to remove the additional names easily is with the consent of the new owner(s).
The only way to do this forcibly is through lawsuits, which will affect your estate planning costs significantly. Plus, inter-family lawsuits almost never end well.
You lose decision-making abilities
As stated, once you put the name of somebody else on your deed, this person has to sign off on all decisions related to the property. For instance, you would now no longer be able to sell the home without your child’s consent. The same goes for taking out a home equity line of credit.
Your child’s financial life becomes involved
In the event that your child is not good with money, creditors could place a lien against your property if the child’s name is on the deed. If your child goes through a Chapter 7 bankruptcy, there is a possibility that you would need to sell your house to placate creditors. If your child marries and subsequently goes through a divorce, since the property belongs to your child the court will divide it along with the rest of the child’s assets. This means you could potentially end up with your child’s ex-spouse owning a share of the property. This complicates estate planning greatly.
What are the alternatives?
The better approach is to choose a revocable living trust. With a revocable living trust, you can put your property into it on the behalf of your child. In this instance, you do not own the property any longer: the trust does. In this way, you can avoid probate. You also have the option to revoke the trust if you want to change your mind. A trusted AmeriEstate advisor can help you through this process.
Contact AmeriEstate today to get started.