Should I Add My Adult Children On The Title Of My Real Estate Property?

May 21, 2024

Estate Planning

Notary helping two women with Estate Planning.

Deciding whether to add your adult children to the title of your property is a significant decision that requires careful consideration. Since this choice can have various legal, financial, and personal implications,  it is essential to understand both the advantages and disadvantages before making such a move.

This article will explore the benefits and risks of adding your adult children to your property title. From tax implications to family dynamics, there's much to consider. By understanding the full scope of this decision, you'll be better equipped to make the choice that best suits your family's needs and avoids potential pitfalls. Let's dive into the specifics to help you make an informed decision.

Understanding Property Titles

A property title is a legal document that shows ownership of a piece of real estate. This document includes important details like the owner's name, the property's location, and any restrictions or mortgages on the property. Understanding what a property title is helps you make informed decisions about your real estate.

There are two main types of property ownership: sole ownership and joint ownership. Sole ownership means that one person holds the title and has full control over the property. This means they can sell it, mortgage it, or transfer it without needing anyone else's permission. Joint ownership, on the other hand, involves two or more people owning the property together. In this scenario, decisions about the property typically require agreement from all owners. Joint ownership can be set up in several ways, such as joint tenancy or tenancy in common. Each option has its own legal implications and needs careful thought.

Joint tenancy includes a right of survivorship, meaning if one owner dies, the property automatically passes to the surviving owners. Tenancy in common does not include this right, so if one owner dies, their share of the property goes to their estate and not necessarily to the other owners. Knowing these distinctions is vital for understanding the implications of adding someone to your property title.

Pros of Adding Your Adult Children to the Title

One of the main benefits of adding your adult children to your property title is simplifying the transfer of ownership after your passing. With joint ownership, particularly joint tenancy, your property can transfer directly to your children without going through probate. Probate is the legal process used to distribute a deceased person's assets, and it can be time-consuming and costly. By avoiding probate, you can save your family both time and money.

Another advantage is that this process can provide a sense of security. Knowing that your home will smoothly transfer to your children without legal complications can bring peace of mind. It can also make it easier for your children to act on your behalf if you become incapacitated. They would already have an ownership stake in the property, making it simpler to manage any decisions that need to be made.

Joint ownership can also have financial benefits. It can help in estate planning by potentially reducing taxes. This means more of your estate could go directly to your children, as intended.  . However, it's essential to understand how these tax benefits apply to your specific situation, as tax laws can be complex.

Adding your adult children to the title can also foster a sense of shared responsibility. If your children are co-owners, they may feel more invested in taking care of the property. This can be particularly beneficial if you need help maintaining your home as you get older. It's a way to bring the family together and involve everyone in important decisions about the property.

Cons and Risks Involved

Adding your adult children to your property title has its downsides. One of the significant risks includes the potential for legal and financial issues. For instance, once your children are on the title, they become partial property owners. This means that if they face legal troubles, their share of the property could be targeted by creditors. Divorce or bankruptcy in your child's life could jeopardize your home's security, making it subject to legal claims you didn't foresee.

Tax implications also play a critical role. When you add your children to the title, it may be seen as a gift, which could trigger capital gains tax, especially when the property is not their principal residence. This tax applies to the increase in the property's value since you originally purchased it. If the property has appreciated significantly, the tax bill could be substantial, compared to the probate fees, which is only about 1.4%. 

Family dynamics can also become tense. Sometimes, adding a child to your property title can lead to disagreements among family members. Sibling rivalry and disputes about property management can arise. It's crucial to have open and honest discussions with all involved parties to ensure everyone is on the same page. Miscommunication can lead to strained relationships and even legal battles down the line.

Steps to Add a Child to Your Property Title

If you decide adding your adult children to your property title is the right move, you'll want to follow the correct steps. First, you'll need to consult with a real estate lawyer or a qualified notary public like Lilian Cazacu. Lilian can provide essential guidance and ensure that all legal requirements are met. Meeting with a professional will help you understand the implications and prepare all necessary documents accurately, especially that without an additional document, such as a Deed of Gift, or Bare Trust Agreement, your intention cannot be proven later on, and the Joint Tenancy may be canceled based on the Resulting Trust doctrine. (This is a very complex matter, and we strongly advise you to discuss this with our notary before making up your mind, since there is a considerable amount of litigation related to this aspect.)

Next, you'll have to update the property title through your local land registry office. This process usually involves filling out forms and providing proof of identity for all parties involved. Additionally, there may be fees associated with updating the title, so be sure to budget for these costs. Having all documents in order will make the process smoother and reduce the risk of errors. (Also, don’t forget about the Property Transfer Tax, since not all the family members are exempt.)

Another crucial step is to discuss the decision openly with all family members. Ensure everyone understands the implications and agrees with the decision. Transparency can prevent future disputes and foster a sense of shared responsibility. Keep a written record of these conversations and any agreements made.

Finally, once the new title has been updated, review it thoroughly to ensure there are no mistakes. Errors can complicate future transactions and lead to additional costs. Checking everything carefully will save you time and hassle down the line.

Adding your adult children to your property title is a multifaceted decision. It's essential to weigh the benefits and risks carefully. While it can simplify estate planning and reduce probate complexities, there are potential legal and financial pitfalls to consider. From tax implications to family dynamics, these factors can significantly impact your decision.

Taking the right steps and consulting with experienced professionals can help you navigate these complexities effectively. As our principal notary, Lilian Cazacu has extensive experience working in his notary capacity as well as a lawyer in Europe, here at Lilian Cazacu Notary Corporation, we're able to guide you through the process, ensuring you make informed choices and offering expert notary services. If you want to know more about this topic or the author, please visit our website or call us. Understanding all aspects of this decision will help you make the best choice for you and your family.

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