Jerry Taylor warns against putting your primary residence in your child's name. The child's creditors, divorce, or bankruptcy could force a sale. You also lose the step-up in basis, meaning your child pays capital-gains tax on decades of appreciation. A revocable living trust does the same job without these risks.
Putting your house in your kid's name. It seems like a good plan to avoid the nursing home getting it, to avoid probate, but it's not. And I'll tell you why. You are going to continue living in the home, but it's going to be in your child's name. But what if your child gets sued? What if your child files bankruptcy? If your child gets divorced and an ex-spouse gets a sizable award, you're going to be giving up part or all of that house. There goes your home. Now you say, Jerry, I've got a great kid. Those things would never happen. But the idea is that you want to minimize the risk. You want to do away with that risk if you can, and there are better are options available. And if that doesn't convince you, consider the tax consequences. If you put your home in your child's name, they will not get the step-up in basis when they sell the home. They will have to pay capital gains tax on the difference in the value in the home from when you bought it to when they are selling it. There are several other options available to avoid all of that, but one of the best in my mind is a living trust. You put that home into a living trust. When you die, the home passes to your child outside of probate, completely outside of court. It will not pay capital tax, it is not a good idea to put your home into your child's name. Go to a good estate planning attorney and consider all the other options that are available to you.
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