5 Reasons Not to Add Child to Your Deed
Adding the name of your child to your property deed might seem like a simple way to ensure the smooth transfer of your home and avoid issues like probate after you pass away. However, there are some significant potential drawbacks to be aware of before making this decision.
- Loss of Control
Once you add your child to your deed, they become a co-owner of your property. This means they have the same rights to sell, mortgage, or alter the property as you do, potentially without your consent. You lose sole decision-making control over the property.
- Exposure to Your Child’s Liabilities
If your child incurs debts, faces lawsuits, or files for bankruptcy, their creditors may be able to place a lien on the property or even force its sale. Your attempt to help your child could unintentionally put your own home at risk.
- Complications with Estate Planning
Adding a child to your deed can override other aspects of your estate plan, such as your will or trust. This can cause unintended consequences and potentially lead to disputes amongst your heirs. Estate planning should be carefully considered; prematurely transferring property ownership can introduce unforeseen complications.
- Gift Tax Implications
Transferring part ownership of your home to your child is considered a gift by the IRS. If the property’s value exceeds the annual gift tax exclusion limit, you may need to pay gift taxes. It’s essential to understand the potential tax consequences before adding your child to the deed.
- Capital Gains Tax Issues
When inheriting a property, beneficiaries usually receive a “step-up in basis,” meaning its value for tax purposes is adjusted to the fair market value at the time of the owner’s death. By adding your child to the deed during your lifetime, their basis in the property remains the same as yours. This can result in significantly higher capital gains taxes if they later sell the property.
Protect Your Assets and Your Legacy
Before making any significant changes to your property ownership, consult with an experienced estate planning attorney in Baltimore. An attorney can assess your individual circumstances, discuss alternative strategies, and ensure your decisions align with both your financial goals and your wishes regarding your legacy.
If you are in need of estate planning services or have questions about property ownership issues, contact the Law Offices of Terri D. Mason. Our trust and estate lawyers are committed to helping you make informed decisions and safeguard your assets for the future.
Let us guide you through the complexities of estate planning. Call us for a consultation.