Our Palm Springs Estate Planning attorneys have clients who frequently ask about putting their children’s name on their real property deed. The assumption is that this will avoid probate and will also avoid the necessity for a living trust or other complicated estate planning documents. However, this technique is usually a bad idea.
Except under very limited circumstances, minor children should not own real property. A minor cannot execute legal contracts and thus it becomes extremely problematic when you want to mortgage, sale or rent real property that is jointly owned with a minor.
When you own property with your children then the property becomes part of their estate. This means that any creditor of your children’s estate can attach liens and judgments against this property. Although your child may not have any known creditors beware of the unknown creditors. What happens if your child is at fault in a car accident? The creditor in this scenario can attempt to attach a lien or judgment against the property.
You may have transferred part of the property to your child just to avoid more complicated estate planning documents. However, now your child actually owns a piece of the property. This means that you will need their written consent to sale, mortgage or rent the property.
No one wants to contemplate that their child may predecease them. Unfortunately, this does occur. Also, many families travel together. If you and your children die simultaneously now the property must be probated but it will be a mess. The child’s ownership interest and your ownership interest must go through separate probate cases.
The minute you put your child’s name on your deed it is as though you just gifted to them a portion of the property. If the value of the gift is over $14,000 you will be required to file a Gift Tax Return. Although you probably will not owe any taxes on this gift transfer, you are still required to file the return.