Should I Change The Title Of My House To My Kids As I Age?

As people age and think more seriously about estate planning, one common question arises: “Should I put my house in my kids’ names now, or leave it in my name until I pass?”

On the surface, it may seem like a simple way to avoid probate or make things easier for your children.

But transferring the title of your home during your lifetime comes with significant legal, financial, and tax implications—some of which can be quite costly if not carefully considered.

Let’s break down the key pros and cons of changing the title of your home to your children.

The Appeal: Why Some Consider Transferring the House

1. Avoiding Probate: Transferring your home’s title now means it won’t have to go through probate when you die. Probate can be a time-consuming and sometimes expensive legal process, so avoiding it is a common goal.

2. Simplifying the Inheritance Process: With the home already in their name, your children won’t need to go through the courts to take ownership.

3. Medicaid Planning: Some people transfer assets like their home in an attempt to qualify for Medicaid. However, this strategy can easily backfire if not done properly.

The Risks: What You Might Lose by Transferring the Title

1. Loss of Control: Once you transfer the title, you no longer legally own your home. That means your child could sell it, refinance it, or be affected by their own financial problems—like divorce or bankruptcy—which could put your home at risk.

2. Capital Gains Tax Trap: If you gift your home during your lifetime, your child receives your original cost basis (what you paid for it). When they sell it, they could owe significant capital gains taxes on the appreciation. By contrast, if your child inherits the house after your death, they receive a stepped-up basis, which could eliminate most or all of the capital gains tax.

3. Medicaid Look-Back Period: Gifting your home could disqualify you from Medicaid benefits if it occurs within five years of applying. Medicaid has a strict look-back period and penalizes such transfers.

4. Unintended Consequences: If your child gets sued, goes through a divorce, or has creditor issues, the home could be considered part of their assets. You could lose your home through no fault of your own.

Alternatives to Consider

If your main goals are to avoid probate and protect your home, there are often better solutions than an outright title transfer:

• Transfer-on-Death Deed (if available in your state): This allows your home to pass directly to your heirs upon your death, skipping probate but without giving up ownership during your life.

• Life Estate: A legal arrangement where you retain the right to live in and control the home for the rest of your life, while naming someone to inherit it when you die.

• Trusts: Placing your home in a revocable living trust can help avoid probate while keeping control in your hands.

Bottom Line

Transferring your home to your children during your lifetime might sound like a smart move, but it can create more problems than it solves.

Before making any decisions, it’s crucial to speak with an estate planning attorney or financial advisor who understands your personal goals, tax situation, and long-term care needs.

A good plan considers not just what happens after you’re gone, but how to protect you and your assets while you’re still living.

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This is article is for informational purposes only and should not be considered as tax or legal advice. Advice is only provided after entering into an Advisory Agreement with the Advisor. See other disclosure here: Disclosures