Why Adding Your Children to Your Deed Is the Wrong Decision

“Wouldn’t it be easier to just add my child to my deed?” 

At Family First Firm, we get this question all the time from people looking to avoid the probate process. Adding your adult children as joint owners to a home can seem like a low-cost way to ensure your property goes to your intended heirs after you pass. Unfortunately, this shortcut can create significant and expensive problems, from tax consequences to Medicaid eligibility issues. Changing your deed without careful planning can cost more than it saves. 

Here’s why you should talk to an experienced elder law attorney before making these changes to your home’s deed.  

You May Trigger Unintended Tax Consequences 

Adding a person to your deed is generally treated by the IRS as a taxable gift. Although you may not owe gift tax immediately, the transfer must be reported. Later, if your child sells the home, they may face substantial capital gains taxes based on your original purchase price rather than its value at the time of your death. 

However, if your children inherit the home, they receive a ‘step-up’ in basis, meaning the property’s value resets to its fair market value at the time of your death. This can significantly reduce, or in many cases, eliminate the risk of capital gains taxes. 

You Could Lose Control of Your Own Home 

No one likes to consider a relationship becoming strained or estranged, but circumstances change. Once your children are listed on your deed, they legally own a portion of your home, meaning you no longer have complete control over one of your most valuable assets. If you want to sell, refinance, or take out a home equity loan, they will have to agree. 

Even if your children are cooperative, their co-ownership can create other liabilities. If they go through a divorce, lawsuit, or bankruptcy, their share of your home could be subject to those legal proceedings. These worst-case scenarios could result in a forced sale, refinancing pressures, or legal complications entirely outside your control. 

It Can Jeopardize Your Medicaid Eligibility 

At Family First Firm, we specialize in Medicaid qualification and asset protection, so we know firsthand how many seniors end up needing long-term care. Medicaid can help cover the high cost of a nursing home or assisted living, but the benefits come with strict financial eligibility rules. 

Adding your children to your deed is considered an asset transfer, which is not allowed under Medicaid’s rules within 5 years of applying. This can trigger a significant penalty period in which you’ll be ineligible for benefits, meaning you may have to pay privately for care until the penalty expires.  

Fortunately, there are many ways we can help protect your home from probate while still planning for possible Medicaid eligibility. 

There Are Safer, Smarter Alternatives 

If your primary goal is to avoid probate while maintaining control and protection, there are other solutions. Depending on your goals, an experienced estate planning attorney at Family First Firm can help you consider options such as: 

• A revocable living trust, which allows you to retain control during your lifetime and transfer property seamlessly after death without probate. 

• An enhanced life estate deed, commonly called a Ladybird Deed, which allows you to maintain full control of your property during your lifetime, while automatically transferring it to your chosen beneficiaries after death. 

• A Family Fortress Trust, which is designed to safeguard your home and preserve eligibility for future long-term care benefits. 

These strategies can help you achieve your goals while avoiding the financial and legal pitfalls that come with adding your children directly to your deed. 

Family First Firm – Your Ally in Avoiding Probate 

For most people, our homes are our most valuable asset. Though you may want to make things easier (and less costly) for your children, adding them to the deed is rarely the right decision, with the risks outweighing the potential benefits.  

Before making any changes to your property, speak with our team. With the right legal guidance, you can protect your home, preserve your benefit eligibility, and ensure your wishes are carried out as you intend. 

Ready to speak to our team?

Schedule a Discovery Discussion Today!