Video Summary
Should a parent place their child on a deed, in order to avoid probate?
I get this question asked me probably once a week, or once every two weeks. And the answer is, I do not recommend that you place a child on your deed. Particularly if it’s the deed to your home, since your home is homestead, and that has particular status. By having the property as your homestead, it’s not considered as an asset, if you need to qualify for Medicaid purposes.
You don’t want to have conveyed that, ’cause there could be some issue of whether or not you transferred the property without full and fair consideration, as far as Medicaid’s concerned. Also, if you add a child’s name to your homestead property, they will not get what they call a step up in basis or an increase in the basis, as far as the property, whenever you pass away. And they may have to pay, and they sell the property, well, then, their basis is what you paid for it, particularly if you owned it for some time.
Also, if you sell the property during your lifetime, and you’ve added a child’s name to it, you can exempt up to $250,000.00 of gain, if you’ve lived in your home two out of the past five years. Whereas, the child who is on there hasn’t lived there, so they may have to pay taxes. So, that’s another reason not to do it.
Also, if it’s your home, and as homestead, if your child would have some kind of credit problems, or domestic problems, they’re half owner of your property. And if Capital One comes and sues them under their credit card, and they get a judgment, it may attach to a half interest in your home. And we wouldn’t want that to be a you be a co-owner with Capital One, as far as your home is concerned. That’s a little bit of a reach, but anyway, they could levy on the child’s one-half interest on the house.
What I’ve found very effectively to use, rather than adding a child to the title to your property, is to execute an enhanced life estate deed. And many people have heard of this as a nicknamed a “ladybird deed,” which basically leaves the property and the person’s name, the parent’s name, during their lifetime. So that they can sell the property, do whatever they want to with the property, and the child doesn’t have to have any interest in the property during their lifetime. And if the parent still owns the property at the time of their death, well, then, it’ll automatically pass to their child, and all the child needs to do is file a death certificate.
So if you would like to avoid probate, and have your property pass to a child, or your children, give me a call at 727-847-2288. Thank you.