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By the Book

"Should I add my child’s name to our house and other properties? It’s going to them anyway."

The short answer is no. Of course, there are situations where you are in fact buying the house with your child where it would make sense to have each buyer on title. However, for the most part, your “estate planning” should not involve putting your children on the deed as a way to easily pass them the house when you die. Here are some reasons why.

  1. Not what you intended – For the most part you do not intent to give them ownership of the house today. By putting them on title you are “giving” them half the house now.

  2. If they sue your child they can come after your house – You say, I am ok to give half the house to my child now, I trust them and they will not sell it or do anything while we are alive. The problem is not what your child will do but what their creditors will do. If your child is sued, they can go after your house that they also legally own.

  3. What happens if my child gets a divorce or gets married? – In general, the property you put their name on (by way of gift) is considered separate property (non-marital property), but you cannot control your child from treating it as community property with their spouse. In such cases, if your child were to get a divorce, the divorcing spouse may have ownership rights to part of your house.

  4. You may end up giving unequal inheritances to your kids -  By adding each child to your respective properties based on present value, you run the risk that those properties will not grow in value equally. This will have the unintended consequence of passing very unequal shares to your kids at your death. 15 years ago your lake house in Merced County was about the same price as the small house in Cupertino, so you added each of your two children to each deed. Today it’s likely that those values will be vastly unequal. The unintended consequence is the child will be left with very unequal shares of your assets.

  5. I’ve already added my children to the deed, how do I take them off? Though it’s not as easy as simply removing their name, it’s not the end of the world. Since they have ownership of a portion of the house, in taking their name off, they are making a gift (if you are not buying from them) of their ownership of the property to you. Your children may transfer (back) their shares by way of a deed to you but just make sure they are aware of the implications. This would be best done through an attorney.

In general, most parents do not actually intend to give half of their property to their children today. For one reason or another, they assumed that adding the name of their children was the best way to pass on their property. Creating a living trust will allow you to smoothly leave your property as you intend to.