Aging parents want to ensure that their home goes to their children after they die. Worried about the process of sorting out assets and paying debts, some think they can simplify things by adding their children to the title on their home.
Experts say: Don’t do it.
Whether you want to add an adult child or a new partner if you’re engaged or in a long-term relationship, experts like real estate lawyer Harvey S. Jacobs advise against it. Writing in the Washington Post, Jacobs says adding another person to your title is like giving away half of your home, which is likely your most valuable asset. As a partial owner of your home, this gives the person power you may not realize:
- If your child or partner has a financial setback or has liens, his or her creditors can come after your home now.
- You can’t refinance the home without that person’s agreement, and their credit score will affect the loan you’ll be able to get.
- You can’t sell the home without your new co-owner’s signature and agreement.
- If your child dies before you, his or her half of your home could be inherited by others.
There are also tax implications. Adding someone to your title may be considered a taxable gift at tax time. And, your child or partner could have to pay capital gains taxes when they sell because by being on the title, they are considered to have bought the home when you did. If the value has risen, they will be subject to capital gains taxes if they sell the home after you die. In contrast, if they inherit the home after you die, they take over at the value of the home on the day you died.
Before you make any decisions or take any action, it’s best to talk with your lawyer and get his or her advice.