Key Takeaways:
- Adding children to your property deed is a common strategy intended to simplify the transfer of real estate upon death and avoid the probate process.
- While this approach can offer ease and convenience, it also comes with potential risks and legal implications that must be carefully considered.
- Consulting with an estate planning or real estate attorney is crucial to understand all implications and explore alternative estate planning strategies.
For many homeowners, the prospect of their real estate going through probate upon their death is an unsettling thought. As a result, some consider adding their children to their property deed as joint owners. While this can seem like a straightforward solution to bypass probate, it’s important to weigh the potential benefits against the risks and long-term consequences.
Understanding the Deed Addition Strategy:
Adding a child to your deed typically means changing the title of your home to include them as a joint tenant with rights of survivorship. This arrangement means that upon your death, ownership of the property automatically transfers to the surviving joint tenant(s) without the need for probate.
Pros of Adding Children to Your Deed:
- Avoiding Probate: The primary benefit is avoiding the probate process for the property, which can be costly and time-consuming.
- Immediate Transfer: Ownership transfers immediately upon death, which can provide quick access to the property for surviving owners.
- Simplicity: It’s a relatively straightforward legal procedure compared to setting up trusts or other more complex estate planning instruments.
Cons of Adding Children to Your Deed:
- Loss of Control: Once you add a child to your deed, you share ownership. You cannot sell or mortgage the property without their agreement.
- Exposure to Creditors: If your child faces legal problems, files for bankruptcy, or undergoes a divorce, your property could be exposed to their creditors or be considered in the divorce settlement.
- Potential Tax Disadvantages: When you add someone to your deed, they inherit your tax basis in the property. This can result in significant capital gains taxes when they sell the property, unlike inheriting property through probate, which typically steps up the property’s basis to its value at the time of death.
- Family Disputes: Co-ownership can lead to disputes among siblings or between the surviving parent and children, especially if one party wants to sell the property.
Alternative Strategies:
- Living Trusts: Placing your property in a living trust can provide similar benefits to adding a child to your deed but with greater control and fewer risks.
- Life Estate Deeds: Another option is a life estate deed, where you retain ownership until your death, after which the property passes directly to a named remainderman (e.g., your child).
While adding your children to your property deed can be a tempting option for avoiding probate, the decision should not be made lightly due to the potential risks and financial implications involved. It’s essential to consider all aspects of this strategy and discuss it with a professional who can provide personalized advice based on your specific financial and family situation.
Get Help Today with Hurban Law, LLC in Lawrenceville, GA
Before making any decisions, consult with an estate planning attorney who can help you evaluate whether adding your child to your deed is the best option for your circumstances or whether other estate planning tools might better serve your needs.
