Many people who are seeking ways to simplify things for their loved ones after they’re gone consider adding one or more of their children or other family members to the deed to their home. If you add an adult child, for example, to your deed, they become a co-owner of the property while you’re alive. They can then inherit it when you die, and it doesn’t need to go through probate.
If you choose this option, it’s essential to do it correctly. The best way is to create a new deed listing all of the owners as “joint tenants with rights of survivorship.” If you simply add someone to your current deed, they become a co-owner, but they may not have rights of survivorship, and the property may still need to go through probate.
There’s an important potential downside for the person you’re adding to the deed if they don’t pay you fair market value for their share of the home. They may have to pay a gift tax to the Internal Revenue Service (IRS). This year, taxes are assessed on gifts valued at more than $15,000. Given the price of real estate here in Southern California, even a small percentage of ownership in the average home would exceed that.
It’s also crucial to understand the limitations you’ll face if you add a joint tenant. For example, if you decide to sell the home or refinance your mortgage, your new joint tenant has to give their consent.
Further, your child or another family member could decide to sell their share of the property to someone else. That means someone you don’t know could end up as a partial owner of your home.
Finally, it’s important to understand that if your new child or other new joint tenant ends up in deep debt to the IRS or creditors, you could find a lien placed on your home. It could also become a source of dispute in a divorce.
If you’re considering adding a family member to the deed on your home, talk to your California estate planning attorney. They can help you determine whether this is the best way for you to accomplish your goals and suggest possible alternatives, as well as other strategies for passing on your assets to loved ones and other chosen beneficiaries.