The Washington Post - 22.02.2020

the

washington

post

.

saturday,

february

22,

2020

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selling the home, the value of the

home to the child is the selling

price even if the parent

purchased the home at a fraction

of the price years ago.

In this example, the parent

would pay no federal income

taxes when the home passes to

the child and the child pays no

federal income taxes on the sale

of the home.

Your excellent point adds to

the conversation that many

children have their own financial

issues that can inadvertently

wind up pulling parents down a

financially dangerous path —

when in fact these are issues they

could avoid with a little

forethought and planning.

Children may have student

loan debts, credit card debt,

medical debt or other liabilities

that could cause creditors to go

after those children. If the parent

owns the home in the parent’s

name, the parent doesn’t have to

worry about those creditors

during the parent’s lifetime.

Once the parent dies, it’s a

different story. The creditors can

go after the home if the child has

inherited the home or gets

money from the sale of the home.

But if the parent adds the

child to the title of their home,

that, as you correctly point out,

could open the door to creditors

and years of hassle that the

parents would otherwise avoid.

We won’t go into the issues of

trying to protect the child’s

assets after the death of the

parent in this column, but suffice

it to say you’ve given us yet

another reason that parents

should not add their children to

the title of their home. If

possible, the parent can have a

will drafted naming the child as

the heir. The parent can also set

up a living trust that would allow

the home to pass on to their

heir(s) and avoid probate court

and potential creditors in one

fell swoop. For more expensive

or expansive properties, other

trusts may be more useful. A

good estate attorney can provide

context and guidance.

ilyce glink is the author of “100

Questions every First-time home

Buyer should ask.” she is also the

ceo of Best money moves, an app

that employers provide to employees

to measure and dial down financial

stress. samuel J. tamkin is a

chicago-based real estate attorney.

contact them through her website,

thinkglink.com.

Advice

Q: I just read your

column giving

suggestions to an

elderly mother

who wanted to

make sure her

daughter received

her home at death

without probate.

I’m a retired attorney, and I don’t

know how many times I was

asked the same question by

clients over the years.

There’s one thing that you

didn’t mention that often was

the deal killer for the parent

when considering putting the

child on the title as a co-owner.

The child’s undivided one-half

interest is an asset in the child’s

estate subject to claims by

creditors, and the parent is

possibly exposed to a creditor of

the child’s becoming the co-

owner and forcing a sale.

When it came down to a

choice between the possibility of

losing the house on account of

an unforeseen financial difficulty

of the child’s and having the

child wait for the money while a

short probate procedure was

completed, the parent usually

chose the latter.

A: Like you, we’ve found that the

top way parents hope to

accomplish this goal is by simply

adding the adult (and in some

cases, minor) child to the title via

quitclaim deed.

In past columns, we’ve

mentioned that conveying title

to a child while the parent was

still alive could have adverse tax

consequences. In those columns,

we’ve mentioned that the

children may find that they have

to pay more federal income taxes

when their parents die than if

they had inherited the home by

will or through a trust.

In the most common example,

a parent may own a home that

has appreciated in value over the

years. Upon the death of that

parent, and the sale of the home

shortly after the death of the

parent, the child would inherit

the home at a stepped-up basis.

This means that for purposes of

What not to do when

leaving a home to an heir

Real

Estate

Matters

ilyce Glink

and Samuel

J. Tamkin

murata yuki/istockphoto/getty images

Adding your child’s name to your property title creates a risk.

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