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Property Ownership
Joint Home Ownership With a Child
Estate Planner, Oct-Nov 2005
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You may be considering adding adult children to the title to your home as joint tenants. It can be an appealing strategy because, under the right of survivorship, your home automatically goes to your child after you and your spouse die. There's no need for more sophisticated estate planning, and it avoids probate. (For more on probate avoidance, see "Keeping private matters private" in this issue.)

Unfortunately, joint home ownership can create some unintended, and often unpleasant, consequences that could easily be avoided with a little planning. Possible pitfalls include:

Gift taxes
Adding your child to your home's title may be deemed a taxable gift of a portion of the home's value, which can trigger gift tax liability or use up a portion of your $1 million gift tax exemption.

Capital gains taxes

Property transferred at death receives a stepped-up basis equal to its current market value, so your child can turn around and sell the property with no taxable gain. If you add your child to the title, you may not be entitled to a stepped-up basis for the entire value.

Creditor claims

When you add your child's name to the title, the home is immediately exposed to claims by your child's creditors. Trusts and other estate planning techniques can help protect the home from these claims.

Loss of control

By forming a joint tenancy, you give up control of the property. You can't mortgage or sell the property without your child's approval.

The unexpected

If your child dies before you, the home is back in your name without a plan for its disposition. This can have the unintended consequence of depriving your grandchildren of their enjoyment of the property.

In most cases, you can achieve better results with a simple will or living trust.