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.

SEARCH

 

Cheryl A.P. Patterson EA MSFS
Tax Analyst

 

Cheryl Patterson is an Enrolled Agent and a Certified Fraud Examiner. She currently serves as a Tax Analyst at TaxAudit, providing advice and education to the firm's members. Trained in detecting and reporting on incidences of financial fraud, Cheryl applies her skills in the investigation of senior financial exploitation cases for the Texas Adult Protective Services agency, where she volunteers. Cheryl's experience in the private sector includes preparing tax returns, providing bookkeeping services, and forensic financial analysis. She holds a Bachelor of Science Degree in Accounting and a Master’s Degree in Forensic Studies focusing on Forensic Accounting and Investigation.


 

Recent Articles

Business Property
Trade or business property is considered section 1231 property. For taxation purposes, section 1245 or 1250 applies depending on the property’s characteristics.
Child Tax Credit
To claim a child for this credit, the child has to meet several tests. Biology isn’t a disqualifier in claiming dependents, but other factors must be met.
Tax Refund Ahead Sign
One of the best ways to check the status of your refund is on the IRS website. Your tax professional may also be able to give you a timeframe for your refund.
TaxAudit Audit Defense Member and her Family
Yes! Audit Defense is worth it. Not only do audit defense members get help with IRS and state correspondences – there are a variety of other benefits.
This blog does not provide legal, financial, accounting, or tax advice. The content on this blog is “as is” and carries no warranties. TaxAudit does not warrant or guarantee the accuracy, reliability, and completeness of the content of this blog. Content may become out of date as tax laws change. TaxAudit may, but has no obligation to monitor or respond to comments.