Dangers of Deeding Home to Avoid Probate
Here are a few of the reasons to not take this approach:
1. You lose ownership and control of your home once it’s been deeded. Your child or children immediately own the home and can do whatever they want with it. Including kicking you out if a schism arises between you.
2. You will lose your homeowner’s property tax reduction. As a result, the property taxes on the home can easily go up as much as $1,000 per year.
3. When your children sell your home after you pass away, they will likely have to pay significantly more in Long Term Capital Gains Taxes than they would have to pay if they had simply inherited the home from you under a Will or Trust.
4. If your children have creditor problems, their creditors will be able to force the home to be sold to satisfy the debt even if you’re still living in the home.
5. You will no longer have a homestead exemption on the home to protect from your own creditors.
All in all, the risks of this approach far outweigh the benefits. Deeding your home to your children to avoid probate is not worth the risk.