Should I add someone to the title of my house?

Should I add someone to the title of my house?

Common conversation with a client:

Client:  I’d like to add my son to the title of my house.
Me:   What would you like to accomplish by doing that?
Client:  I’m not sure.  My brother (accountant, financial planner, etc.) told me I should so there will be no probate.
Me:  Ok – have you considered the possible positive and negative impact of this decision?
Client:  Not really, I just want to avoid probate.
Me:  Let’s talk a bit more about your situation before we move ahead with the transfer.

 And the conversation goes on to discuss how much the probate fees that she wants to avoid actually are, whether her son has ever owned a house, if he lives in the house, if he is married, if the client has other kids, if she has a will, if she has other property, etc., etc….

It is easy to make a decision to take a certain action based on an expectation that it will solve some particular issue or avoid some specific cost.  However, the costs could be far greater if all considerations are not addressed before taking action.  That’s why it’s important to speak to a professional who understands the areas of law that relate to your needs. The client above needs counsel who practises in real estate law to facilitate the transfer (if it is ultimately decided to be the right decision) but who also understands estates and family law to ensure that she is protected.  There are some very good reasons for adding someone to title and also some good reasons not to.  Here are a few of the main ones.

Below is a list of some of the positive reasons for adding someone to title:

·         It may avoid probate tax for that asset
·         It may cause the estate to avoid probate completely
·         It leaves the asset directly to a particular beneficiary
·         The “bequest/gift” is harder to challenge than through the will
·         The asset is accessible immediately on death – not frozen
·         It is more private being outside the Will
·         It may avoid creditor issues
·         Possibly fewer legal fees later

But…. There’s a flip side – some negative possibilities:

·         It may create exposure to the creditors of the person being added
·         May cause a loss of control of the property
·         Could expose the property as a marital asset of the person being added
·         Possible capital gains
·         First time buyer perks could be lost for the person being added
·         There may be no turning back
·         Possibly higher legal fees later

Bottom line – proceed with caution – and good counsel.  The extent that we prepare well today impacts those we leave behind.