Should I Add My Child to the Deed of My Home to Avoid Probate?

As estate planning attorneys serving Cary, Raleigh, and the greater Triangle area, we often hear from clients looking for ways to simplify the estate administration process for their loved ones. A question that frequently comes up is whether adding a child to the deed of your home can help avoid probate. While this strategy may seem like an easy solution on the surface, it’s important to understand the full ramifications before making any changes to your home’s title.

What Does Adding a Child to Your Home Deed Mean?

When you add your child’s name to your home deed, you are effectively giving them a share of ownership in the property. The type of ownership conferred depends on the specific language used on the deed document. The two most common arrangements are:

• Joint Tenancy with Right of Survivorship: In this scenario, you and your child each own an equal share of the house. When one owner passes away, their share automatically transfers to the surviving owner(s) without the need for probate.
• Tenancy in Common: With tenancy in common, you can specify the percentage of ownership each party has. However, there is no right of survivorship. If one owner dies, their share becomes part of their estate and must go through probate to be passed on to their heirs.

Drawbacks and Risks of Adding Your Child to Your Deed

Loss of Control

One of the most significant downsides to adding your child’s name to your home deed is that you lose exclusive control over the property. Your child becomes a co-owner with full rights to use and make decisions about the home. If you later decide to sell or refinance the house, you’ll need your child’s permission.

Troublingly, your child’s ownership share is also subject to their personal liabilities. If they go through a divorce, have a creditor seek assets to pay off a debt, or face a lawsuit, the home could be at risk.

Potential Tax Consequences

Adding your child to your home deed could also create gift tax and capital gains tax issues. Let’s explore each:

Gift Tax

Anytime you transfer assets to another person without being paid fair market value in return, that transfer could be considered a taxable gift. For the year 2025, individual gifts over the $19,000 annual exclusion are subject to the gift tax. Now, most people won’t actually owe tax thanks to the $13.99 million lifetime gift and estate tax exemption. However, you would need to report the gift by filing a gift tax return. This reduces the exemption amount available to you at death.

Capital Gains Tax

Adding your child to the deed also impacts their future capital gains tax exposure. When a home is inherited after the owner’s death, the property receives a step-up in basis to its fair market value as of the owner’s date of death. This reduces your child’s capital gains tax burden if they later sell the house.

However, when you gift a share of ownership during your lifetime, the child takes on your original cost basis. Let’s say you purchased your home years ago for $75,000, and it’s worth $450,000 today. If your child inherits it after your death, their basis would be stepped up to $450,000. If they later sell for $500,000, they’d only pay capital gains tax on the $50,000 increase.

But if you add them to the deed now and they sell for $500,000 after your death, their cost basis would be $50,000 – 1/2 your original $75,000 cost plus 1/2 the stepped-up value of $450,000. They would pay capital gains tax on $200,000 in gain instead of just $50,000.

Medicaid Eligibility Concerns

Adding your child’s name to your house deed could also jeopardize your eligibility for Medicaid coverage of long-term care down the road. Medicaid has a five-year lookback period where they review all asset transfers. Gifting a share of your home to your child within this window could be interpreted as an attempt to qualify by sheltering assets.

Alternative Estate Planning Strategies

While adding your child to your home deed may seem like a simple probate avoidance strategy, it often creates more problems than it solves. Fortunately, there are other estate planning tools that can facilitate a smooth property transfer without these drawbacks:

Living Trusts

A revocable living trust allows you to place your home and other assets under the management of a trustee. You can serve as trustee during your lifetime, continuing to control the property. Upon your death, your named successor trustee (often your child) can efficiently distribute the home according to your wishes without the need for probate.

Transfer on Death Deeds

Some states, like California and Texas, allow property owners to record a Transfer on Death (TOD) deed. This document names a beneficiary to inherit the home but doesn’t give them any current ownership rights. Upon your passing, the house transfers to your designee without probate.

Life Estate Deeds

With a life estate deed, you retain the right to use and occupy the home for your lifetime. When you pass away, full ownership transfers to your named beneficiary (your child). This avoids probate while letting you keep control.

Making the Right Choice for Your Family

Ultimately, the decision of whether to add your child to your home deed depends on your unique circumstances and goals. What works for one family may not be the optimal choice for another.

At Cary Estate Planning, we understand that estate planning is deeply personal. That’s why we take a personalized approach, taking the time to get to know each client’s situation, concerns, and objectives. Our experienced estate planning attorneys can walk you through the pros and cons of various probate avoidance strategies and craft a tailored plan to preserve your legacy.

If you’re considering adding your child to your home deed or have other estate planning questions, we invite you to contact us to schedule a Discovery Call. Together, we can explore your options and design an estate plan that provides peace of mind for you and your loved ones.