What Can Happen if You Add Your Adult Child to Your Home’s Title

As we get older, it’s common to want to add your child’s name to the title of your home. Since you plan on leaving the house to your child, why not add your adult child to your home’s title now? You may think this is a good way to avoid probate court, and the house will automatically be left to the other person on the deed. There is actually more bad than good that can happen in this situation.

Why You Don’t Want to Add Your Adult Child to Your Home’s Title

While you may have the child’s best interest in mind, many things can go wrong with putting them on the title of your home. You want to do what is best for your child. But making them a co-owner of your home is not always the right decision.

Several ramifications can take place. And here are 3 reasons why to keep the house in your name only:

1. Gift tax laws.
   If you decide to add your child to the title of your home, you are essentially gifting them half of the house. And it may be considered a taxable gift. Your child will be charged a gift tax of 50% of the fair market value of the home.
2. Creditors.
   Let’s say your child has a lawsuit against them, goes through a divorce, has a tax lien or files for bankruptcy. That means that half of your home is not subject to your child’s creditors. In some instances, the creditors can try to foreclose on the property and get their money from the sale of the house.
3. Partial ownership.
   Your child now owns half of the house. You will not be able to sell the property without their permission. And if you do sell the house, you can only claim the IRS residence capital gains exclusion on half of the selling amount. You are missing tax benefits.

There are better ways to leave the house to your child than adding them to the title of your home. Setting up a revocable or irrevocable trust is generally used to avoid probate court and estate taxes. Working with an experienced estate planning attorney can help you find the best way to leave all assets to your loved ones.

Talk With An Oak Brook Estate Planning Attorney

We can help you establish the estate plan that you want. Establishing a will or trust is a better way to leave your home to your children. Your estate plan can be a final gift to loved ones. Let the Estate & Probate Legal Group in Illinois guide you each step of the way. Contact us today at 630-864-5835.

AREAS WE SERVE: DuPage, Kane, Lake and Will counties.