Recently, I have received many calls from potential clients who say “I want to add my child’s name to my deed” or “I want to transfer title to my house to my child”. I, without fail, tell these clients that they need to think long and hard before this is done.

Generally, the reasons a home owner would want to do this is either to avoid Probate upon his or her passing or to attempt to preserve the home in the event of a long-term nursing home stay.

When you add another person’s name to a deed, you lose a degree of control over your property. If you want to sell or mortgage your home, your new co-owner has to agree and sign any needed documents. If this person is sued or has financial trouble, your house is vulnerable to being lost. If your name comes completely off the deed, then you have no say in what happens with your house.

Another consideration is that if you receive the homestead exemption on your property taxes, then this discount may be reduced or ended all together. Next, your child likely will need to pay capital gains tax (as high as 20%) once he or she sells the property.* To avoid this tax, a child needs to inherit the property or, in other words, take title after your death.

Now, one of the few ways to protect your house from being sold and it’s proceeds spent on a long-term nursing home stay, is to take your name off the property (then wait 5 years). However, again, you still face the downside to this action which I outlined above. So, this action needs to be carefully considered if the risky downsides are worth the transfer.

If the only goal is to avoid Probate, there are several, non-risky ways to do this, without changing your current ownership. If you live in Ohio, feel free to call me and we can discuss these options!

* Do not despair – when selling a property (during your life) that you resided in, you are exempt from capital gain taxes.