Is it a good idea to add my child as joint owner of my home?

We frequently have clients come into our office asking us to add one of their children as a joint owner of their home.  Generally, we recommend against this course of action because of all the possible negative impacts it may have on the parents.

Our clients typically want to add a child to title of their homes because they want to simplify things for loved ones when they die.  For example, a parent may want to avoid estate fees related to the home or ensure the home goes to a specific child.  However, it is important to think about other ways adding a child to title may impact you.  Adding your child as a joint owner makes you vulnerable to your child’s future financial predicaments, including bankruptcy, disgruntled creditors or law suits, because your child’s assets now include ownership in your home.

Another way adding a child to title may negatively impact you is in the event your child gets divorced.  If your child gets divorced, his or her spouse may have a claim to a significant portion of your home and, if your child is unable to pay out his or her former spouse, you may have to find a way to pay so you can stay in your home.

Your child will also need to be consulted if you ever want to sell your home.  As joint owner, he or she will need to agree to the sale and cooperate in completing all the sale documents.  You may think your child would never stand in your way, but what if your child disagrees with your decision to sell or is resistant because he or she disapproves of your plans for where you will live next?

There are also potential tax consequences to your child if you sell your home.  As your primary residence, you have no tax consequences on the sale of the home, but your child may have to pay taxes on their share of the home if his or her primary residence is elsewhere.

Finally, you will want to consider the implications on your estate if you have other children who will be inheriting under your Will.  You should make sure your Will takes into account the gift of your home and is clear about the division of your estate among your children.

Before adding a child as a joint owner of your home, it is wise to consult with a lawyer and an accountant to ensure this course of action is the most prudent in all the circumstances.