Should I Deed my Home to my Children to Avoid Probate?
The first problem with this approach to avoiding probate is that you no longer own your own home. If you and your children have a falling out, they may decide that want to sell the home and keep the money even while you are still living. They can simply order you to find another home.
Even if they don’t kick you out, your home may be lost to creditors of your children if they fail to pay all of their debts. Any creditor of any child whose name is on title can order the home to be sold at a sheriff’s sale in order to pay your child’s unpaid debt.
Next, if the children are not also living in the home with you, the home will lose the Homeowners Exemption that cuts down on property taxes. The cost of the loss of that exemption could easily be $1,000 every year.
Finally, when you have passed away and the children decide to sell the home, the amount that they will owe the government in capital gains taxes will likely be many thousands more if you deeded the home to them while you were still alive. Waiting to give them the home when you pass away will cut down on, and maybe even eliminate, those taxes.
While this office believes there is a significant benefit in avoiding probate, that benefit is far outweighed by the risks encountered from simply deeding the home to your children. Instead, a Family Trust can be a relatively inexpensive way to avoid probate while protecting you from any of these downsides.