Let me just say this…
Do not add your kids to your deed.
…Unless…(I am a lawyer after all)
There are few questions in law with a pretty definitive answer. But this is one. Let’s start with the hard and fast rule of “Don’t add your kids to your deed.” Here’s why. Adding your kids to your deed without thinking it through could cause a whole heap of trouble. Here are the first five on that heap:
- When you add your kids to your deed, it is a gift you cannot just take back. This is a gift to them and once given, they would have to give it back to you if you wanted it back. What if they don’t want to give it back? Well, then you’re stuck. If they want to keep it, they can. If you don’t have a big enough carrot or stick to force them to give it back, they might just refuse.
- What if you added just one of your kids to your deed but left other kids out? Well, you just cut the other kids out of an inheritance. You may want to disinherit your other kids (and no one can stop you from doing that), just don’t do it inadvertently. Also, if you absolutely must disinherit a child, consider engaging in some therapy if you haven’t already because there’s often hurt or pain that should be worked out before you cut someone you once loved out of your estate.
- In putting your kids on your deed (presumably in joint tenancy) you just exposed your home to your kids’ liabilities. Each child, every liability. So, for example, if one of your kids has a car wreck and gets sued, the person suing your child will try to reach every asset your child owns, including your home. You might not end up actually losing your home, but you’re going to have to go through a whole lotta trouble to keep your house. Do you really want to have to go through something like that just because you’re looking for a cheap and easy estate plan?
- A lot of people put their home in the name of one of their children (usually the one taking care of them) and tell that child to share with their siblings. Do you really think they’re going to share? Pah-lease. Even if they wanted to share, they’re going to have to go through a whole legal process to gift or share it with their siblings after you die. All you did there was A.) put your kids in a challenging situation because you didn’t want to do what it takes to plan properly and B.) tempt one of your kids to take the whole asset from their siblings. Most parents think their kids can get along but this is naive. Parents have no idea what sibling rivalries are between our children and we may never know. When a parent dies, that’s when all the rivalries become revealed and you won’t be here to work it out between them. So don’t do that to your kids.
- If you convey a home to your kids and there’s still a mortgage on it, the lender can call the loan and force you to pay it off immediately. That could result in a very challenging financial situation.
Okay, here’s the unless part…
- If you have only one child, there’s no risk of the sibling rivalry problem above.
- You might want to make a gift of your (paid off) residence to your child in the present moment. Okay, then, maaayyybeee. But remember, don’t add a kid to a deed that has a mortgage on it.
I return to my original statement. Unless one of these two exceptions applies and you’ve spoken to a lawyer about it, PLEASE DON’T ADD YOUR KIDS TO YOUR DEED.
What to Do Instead…
- If you’re thinking of trying to find an easy way out of doing an estate plan, ask yourself why. If you can identify why you don’t want to get a plan done, it’s easier to find a way to fix the issue rather than just muddle through. It could be that you don’t like or trust lawyers in general (understandable). Or that it’s too expensive (also understandable). Or that you don’t want to involve anyone in your personal affairs (again, understandable). All these are common concerns I hear. All can be worked through with the right information, practitioner, and practices.
- Take a lawyer or two up on their free consultation offers. They may give you a cursory answer but that’s better than nothing.
- Better yet, pay a lawyer for an hour of their time to analyze the situation more fully for you. That way you at least get decent advice and the lawyer is compensated. Everyone’s happy.
This has been a PSA from your friendly, neighborhood estate planner.