As you navigate the complexities of aging, your focus may naturally shift towards securing the future for your loved ones. That may include thoughts on how to pass down your assets. Among your assets, your home may hold the most significant value, both monetarily and sentimentally. If you’ve contemplated ensuring that an adult child inherits your home after you pass away, you might consider placing them on the deed as a co-owner. If so, the Essex Junction attorneys at Unsworth LaPlante, PLLC discuss putting your adult child on the deed to your home.
Passing Down Your Home
Your home is more than just a piece of property; it’s a symbol of security, comfort, and perhaps decades of memories. Naturally, you want to ensure its smooth transition to your loved ones when the time comes. Adding your adult child to the deed might seem like a straightforward solution to this objective. After all, by making them a co-owner now, you can pass your ownership in the house to your child simply and easily upon your death. Unfortunately, the issue is far more nuanced, providing several compelling reasons to proceed with caution, such as:
- Legal implications of a divorce. Once your child’s name is on the deed, they become a co-owner of a valuable asset. If your child later becomes involved in a divorce, their share of the home could be subject to division as a marital asset. This scenario contrasts starkly with the protection afforded by an outright inheritance, where the home would likely be considered separate property in a divorce settlement.
- Eligibility for government assistance programs such as Medicaid. If you require long-term care and need to qualify for Medicaid within five years of adding your child to the deed, Medicaid will likely consider the addition of your child to the deed as a transfer of assets for less than fair market value. That, in turn, could trigger a waiting period for benefits. Implementing proper estate planning strategies can help safeguard your home and ensure continued or future eligibility for crucial assistance programs.
- Your childâs debts. While your child may be responsible with money now, unforeseen circumstances can arise. Once their name is on the deed, any financial liabilities they incur could potentially affect your property. Creditors may place liens on the home to satisfy your child’s debts, jeopardizing your financial security and peace of mind.
- Tax implications. Transferring partial ownership of the house to your child while you are alive can have significant tax implications, particularly regarding capital gains. Adding your child to the deed while you are alive means your child would inherit your basis in the property, potentially leading to substantial tax liabilities upon its sale. In contrast, if the home is gifted to them upon your death, it receives a stepped-up basis, resulting in a lower tax burden and preserving more of your legacy for future generations.
- Loss of control. Perhaps the most profound consideration is the loss of control over your home. Co-ownership means you cannot make significant decisions about the property without your child’s consent. Whether you wish to refinance, sell, or make alterations to the home, you are legally required to get your childâs consent. Even if your relationship with your child is strong, relinquishing control over such a cherished asset can be daunting and may lead to conflicts or complications down the line.
While the prospect of adding your adult child to the deed to your home may seem appealing on the surface, it’s essential to weigh the immediate and long-term implications carefully. Consultation with an experienced estate planning attorney can provide invaluable guidance in navigating this complex decision.
Do You Need Assistance Deciding Whether to Add Your Adult Child to the Deed to Your Home?
For more information, please attend one of our upcoming FREE webinars. If you need assistance with estate planning, contact an experienced Essex Junction estate planning attorney at Unsworth LaPlante, PLLC by calling 802-879-7133 to schedule your appointment today.
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