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There are several reasons why homeowners may be tempted to put their house in a child’s name. However, it’s important to understand the risks that come with this strategy.

Altruism

Altruism may be the most obvious reason to transfer a home to a child. By giving a home to a younger family member, you can help him or her achieve the goal of home ownership without incurring the significant expenses it usually entails.

Estate Planning Benefits

Some people also consider transferring ownership for estate-planning reasons. If you are planning to bequeath the family homestead to your child, transferring title while you are alive may enable you to reduce the taxable value of your estate. If your child’s name is on the deed at the time of your death, the house will not go through probate.

Potential Risks

Before you sign over your property, though, it’s important to consider the risks involved. For example:

  • After you put the house in a child’s name, he or she will be the legal owner of the property. In the eyes of the law, you will have no say regarding decisions such as whether to sell the home or borrow against its value.
  • If your child is unable to pay debts (such as personal loans or outstanding tax bills), the home could be seized to satisfy those debts.
  • If you transfer the home within five years of applying for Medicaid, you may not qualify for coverage right away. That’s because of Medicaid’s “look-back” rule, which is designed to prevent homeowners from artificially impoverishing themselves in order to receive benefits. A better idea may be to put the house in a trust instead.

So if you are considering putting your home in a child’s name, consider speaking with a lawyer first.

 

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