Should I add my kids to my house to avoid probate?

September 21, 2020 by Cheryl A.P. Patterson, EA, MSFS
Probate puzzle piece on wooden house

Before making any type of major decision affecting your right of ownership, you should seek out the advice of an attorney that has experience in this area.

As a Certified Fraud Examiner and Forensic Financial Analyst, I am trained to investigate and report on cases of financial fraud. Unfortunately, most financial exploitations that are perpetrated against parents and/or grandparents are done by close family members or other caregivers.

Before making your decision, consider the following before adding an adult child or caregiver to your home, bank account, or credit card:

 

  • If the individual is subject to federal or state taxes owed and they fail to make all payments due, the IRS or state agency may lien the property or garnish a bank account.
  • There have been cases when the individual changed their portion of ownership to 100 percent, then sold the home without the parent’s knowledge and received the net proceeds, or where they have obtained a mortgage against the property.
  • In the case of a bank account and/or a debit card, the individual has equal ownership and access to the funds, possibly depleting the account without your knowledge. Rarely are these funds recovered.
  • If the individual is going through a bankruptcy, divorce, or is being sued in a lawsuit, all assets tied to the individual are considered and could be at risk of confiscation. This includes assets owned jointly with a parent or grandparent.
  • If added to a credit card(s) the individual may create debt without your being aware and for which you would be responsible.
  • You may be subject to gift tax rules and required to file a return with the IRS or state.
  • Adding a child prior to your death may result in their losing out on favorable tax savings.

It is important to consider all the potential risks and benefits of adding anyone to share ownership of any asset. You should seek legal and tax advice from a professional prior to deciding. There may be more effective ways to protect your assets while considering the future needs for yourself or your children, such as establishing a living trust.

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Arnold van Dyk, Esq
Tax Court Practitioner

 

Arnold is a licensed California attorney and received his LLM in Taxation from Chapman University School of Law. Prior to his career at TaxAudit in 2011, Arnold focused on IRS collections, Offshore Voluntary Disclosures and criminal tax defense. As an audit representative at TaxAudit, Arnold continued to build upon his tax knowledge. In his current position as a tax court practitioner, Arnold assesses the complexities of tax law and regulations to determine the best strategies to resolve cases with the IRS Appeals Office. He also successfully runs his own law practice, Law Offices of Arnold van Dyk, focusing on tax resolution and estate planning. 


 

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