A simple move like putting your kids on the title of your property can lead to bigger problems later. It might seem like a good idea, an easier way of doing death planning, or to feel like you’re securing their future. Adding your children to title of your home could cause a lot of headaches down the line. Let’s break down the dangers of adding your kids’ name to your home:
Lack of Control
When you add your kids to the property title, you’re giving them a share of ownership. This means they have a say in important decisions, like selling the house or getting a loan. It also means they could take you to court if they feel like they’re not getting their fair share of rents. Being reliant on your kids when making a decision to sell or refinance is not a great idea, afterall, this is your property.
Divorce
If your child’s marriage hits the rocks, your property could get dragged into their divorce proceedings – even if their spouse isn’t on the title. When a divorce proceeding is filed all assets in the name of the people getting a divorce is FROZEN. That means your house could be stuck in the legal process, and you might not be able to do anything about it until everything gets sorted out between your kid and his or her spouse.
Kids Lawsuits
Adding your kids to the property title adds danger when it comes to lawsuits. If they get into financial trouble or get sued, your house could be at risk. This is because it is an asset of theirs. You worked hard for your home, so you don’t want it caught up in someone else’s mess.
Tax Ramification
Adding your kids to the property title could also mean big tax bills for them. They could end up owing a lot of money in taxes. If they ever sell the house, after your passing, for capital gains purposes. Remember, by gifting them an interest in your property, they are stepping into your shoes for capital gains tax purposes. Your child will have to pay a capital gains tax that will be calculated based on the purchase price.
So before you go ahead and add your kids to the property title, take a step back and think about whether it’s really the best move. Creating a Trust is one way to make sure your kids are taken care of without putting your home at risk. Contact our office, we can help you figure out the best plan for you and your family. It’s worth taking the time to get it right and avoid any unwanted surprises down the road.
