Some clients think that a good way to avoid probate is to put their adult children on the title to their home. While it is true that putting your child on the deed to your home will avoid probate, it can create all kinds of headaches not anticipated or desired. Here are some reasons:
1. Creditors of your child or the IRS (to enforce a tax lien) can go after the property that you hold jointly with your child and try to force a sale against your wishes.
2. If your child files for bankruptcy, the court could determine that the property should be part of the bankruptcy proceeding and creditors may seek to have it sold.
3. The transfer could be considered a gift, triggering a gift tax problem.
4. If your child is sued because of an accident and has no insurance or is underinsured, a judgment against your child could result in a judgment lien again your child’s interest in the home.
5. If your child becomes involved in a divorce, the child’s spouse could claim that the house is part of marital estate to be divided.
6. If you want to sell the property, your child will have to consent to the sale. Also if you want to refinance, your child will have to consent to the loan.
Joint tenancy can be a useful tool as part of your estate plan in limited situations but it can also lead to many problems. A better way to avoid probate is to create a revocable living trust.