Can I Deed my Home to my Child to Avoid Probate?
We are often asked, “Can I deed my home to my child to avoid probate?”
Our answer is, “Yes, but it’s usually a terrible idea.”
Here are just some of the reasons why this would be a mistake:
- You lose control of your home. Once deeded a child, if a schism arises, the child can sell the home out from under you and force you to move.
- Your home can now be lost to your child’s creditors. If your child has a creditor who obtains a judgment against him or her, the creditor can have your home sold to satisfy the debt.
- You will lose your homeowner’s exemption on the home causing your property taxes to go up substantially. You are only allowed the exemption if you live in a home that you own. If you deed it to your child, you no longer own the home.
- Your child will have to pay more taxes when he or she sells the home because they assume your “tax basis” when you gift the home to your child. But if you leave the home to your child under a Will or Trust, your child receives the home with a “stepped-up basis” that can save them many thousands of dollars when the home is ultimately sold.
In our experience, in almost every situation where a parent deeds the home to a child, that action – though it does avoid probate – has other unintended consequences that are somewhere between annoying and disastrous. So, our advice is “don’t do it.”