The benefits and pitfalls of joint ownership

Helping hand shakes another in an agreement

Helping hand shakes another in an agreementI have a lot of clients ask me about adding a child on title to their house. Usually, I do my best to talk them out of it.

In very limited circumstances, it can make sense to add a child on title. I had one client who had only one child; that child had moved in with them to help care for them, and had sold her house so that their house was her only house. They essentially gifted her their house during their lifetime.

Most of the time, there are so many other factors that people do not think about that make joint ownership a bad idea. As soon as you add the person on title, the house becomes open to their creditors. What if your child separates from his or her spouse? That house is now their property and it may have to be shared on an equalization. What if your child goes bankrupt? Your house is now a part of the assets that will go through the bankruptcy.

On a more personal level, what if your house is the main asset of your estate, and you have only added one child on title? They can refuse to share the house with their siblings. Or if the child you add already has a house of his or her own, he or she could end up paying capital gains tax to sell the house at the end of the day, costing more than the estate taxes would be.

Before you jump to adding someone on title to your house, have a conversation about whether it’s the right idea.