Your Child and the Deed to Your Home

Dear Friends,

“Beware the Ides of March!”

March 15th per the Romans was the day of settling debts and a fitting title to this month’s newsletter. Some clients want to reduce estate taxes or move assets out of their estates by adding their children to their deeds. We wanted to provide you with some details about why this might not be a good idea!

It’s a decision with a lot more implications than what meets the eye at first glance. Without careful consultation with your attorney, this seemingly simple change could create unfortunate and unintended consequences.

If you add a child to your deed, your child becomes a co-owner and this has several implications.

First, if your child is married or may get married in the future, it’s important to consider the repercussions of a divorce claim. If your child goes through a divorce, the court divides the couple’s property. If your child is listed as an owner on your real estate, the court has the right to divide that property. Essentially, it’s very possible your child’s now or soon-to-be ex-spouse could have claims to a share of your home. If you believe a divorce is a possibility, and sadly we see it more and more frequently today, you may want to pause to consider adding your child to your deed.

Next, there’s the risk of creditor claims. The risks are straightforward. If your child is on the deed with you as part owner, then their share is subject to their own creditor claims. If your child is at risk of any claims from liability, including events such as auto accidents, credit card debts, or a lending company holding your child answerable for unpaid debt, their portion of the home will be fair game for these claims.

The possibility of bankruptcy claims is very similar. If your child must file for bankruptcy, the court could be entitled to their share of the home. In general, if your child’s name is also on your home as a shared owner, you’re at risk of any debt or legal trouble they may accumulate.

Finally, if your child dies, their share of the property will pass to their heirs per their estate plan (if they have one).

We have first-hand experience in seeing ALL these situations so they are real possibilities.

If you would like to review your estate plan for changes in this year, please let us know and we would be happy to set up a meeting to discuss further. Please email Noah ([email protected]) to schedule an appointment.