Should we add our children on the title of our home?

This article was originally published by The Hamilton Spectator.

Q: Should we put our kids on title of our home as part of our estate plan?

A: Clients often think adding an adult child on title of their home as a joint tenant is an effective way to transfer ownership of their home to their child on death while also avoiding having to apply for probate and paying probate tax. While this can be a beneficial estate planning strategy in some cases, I often caution clients that doing so has several pitfalls that must be considered before proceeding. I encourage clients to consider the following:

• Adding your child on title might help the estate avoid paying probate tax on the value of your home on death, but it also puts the home’s principal residency tax exemption at risk and could result in capital gains tax that is greater than the savings achieved by avoiding probate.

• You are giving up flexibility to re-finance or sell your home without the consent of your child.

• Your home could be at risk if your child’s financial situation changes. For example, if your child experiences a divorce or incurs significant debts, the child’s ex-spouse or creditors could lay claim to your child’s interest in your home and may result in you having to sell the property.

• If you have multiple children, adding only one on title as a joint tenant could create unnecessary conflict when it comes time to equalizing your estate between them.

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