At our real estate law practice, we often get calls from homeowners—especially older adults or their children—asking about adding a child to the title of a home to avoid probate tax. While this may seem like a straightforward way to save money, it’s a decision that comes with serious legal and financial risks.
Let’s break down the key issues to consider before making a title transfer of this kind.
What You Need to Know:
1. You Lose Full Control
Once you add someone to the title, you can’t sell or refinance the home without their consent. Disagreements can lead to costly legal battles.
2. There Are Tax Consequences
If your child doesn’t live in the home as their principal residence, they could face capital gains tax later. Always get tax advice first.
3. Family Law Can Get Involved
If your child goes through a divorce, their ex could claim an interest in the property. A family law consultation is strongly recommended.
4. Your Home Could Be at Risk from Creditors
If your child runs into financial trouble, creditors may place a lien or judgment on the property. That’s your home on the line.
5. You Need Lender Approval
Have a mortgage? Your lender must approve the title transfer. Doing it without consent could trigger repayment of the entire mortgage.
6. It’s Not Easy to Reverse
Once your child is on the title, removing them requires their agreement—or a court order. That can be expensive, stressful, and time-consuming.
Final Thoughts
Trying to save on probate fees by adding a child to your property title might seem like a smart move, but it often creates more problems than it solves. There’s no such thing as a “simple” title transfer.
Our advice?
Get professional legal and tax guidance first. Understanding all the implications now can help you avoid serious complications down the road.
If you’re considering a title transfer or have questions about estate planning, we’re here to help.