Q: Should I allow my dad to add me to the deed of our family home? What potential liability or risk is involved?
There is still a mortgage and home equity loan on the home along with other debt my dad owes and my husband and I are looking at selling a buying a new home in the next few years.
A: I often advise clients not to add their children to the title of their home, because it can inadvertently expose the parent to creditor claims of the child through divorce, bankruptcy or a lawsuit. However, for you, if your Dad adds you to the title to the home, you would immediately become liable for taxes, maintenance, insurance and other expenses on the home as a co-owner. If your Dad could no longer pay these expenses, it would fall to you as a co-owner. It also sounds like your Dad's credit situation may not be the most stable so you are wise to be cautious about this. As far as the mortgage, adding you to the title would not necessarily add you to the mortgage note, however, be aware that any ownership interest you have in the property is subject to the mortgage, meaning, you only really own an interest in whatever equity your father has in the home. Adding someone to the deed like this can also cause gift tax issues, if the gift of equity is over $15,000 in one individual year. For these reasons and more I recommend your Dad consider leaving his interest in the property to you through a trust at death, whereby you can receive new basis at death on the property (save on capital gains tax) and which would also protect him from any creditor claims you may have during your lifetime, and also protect you from becoming a co-owner in the property now. He could also set up an irrevocable trust to provide further creditor protections on the property. Your dad should talk with a good estate planning attorney about his options before proceeding. I have seen too many situations where adding a child to the deed goes wrong. Check out my video on this topic for more here https://www.youtube.com/watch?v=SNasebs4nzo
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