Should you add a child’s name to your deed in Alabama?

Estate planning: should you add your child's name to your deed?You really need to think it through before you add someone’s name to your Alabama deed because it could cause a lot of unintended pain. Theoretically, adding your child’s name to the deed to your home is a good move because it’s a way to avoid the time and expense associated with probate. But doing so could create problems for you for a number of reasons.

First off, there are possible tax consequences. If you make your child the joint owner of your home, the IRS could treat this transfer as a gift. IRS guidelines permit you to make a gift of $13,000 a year to one person. If the half interest in the home is worth more than $13,000 (which it almost definitely will be) the gift tax provisions of the IRS code will be triggered and your child will be required to pay gift taxes.

Another problem comes from you child’s current and future creditors. If your child has financial problems or develops financial problems at any time after you add his or her name to the title, their creditors may be able to take the house with a lien to satisfy the debt.

An additional problem relates to your child’s spouse. If your child is married and you transfer an interest in your home or bank accounts to him or her, it is possible that their spouse will have a marital interest in the property. If a divorce happens at some point in the future you may be forced to buy out the interest of your in-law to maintain ownership of the home.

Finally, if your child is involved in a car accident and is uninsured or underinsured and gets sued, the plaintiff in the lawsuit may be able to get a lien against your house. If this happens, you would be unable to sell or refinance the property without paying off the lien. If the lien is sizable, it could potentially eat up all of your equity. If your house is instead owned free and clear, the plaintiff could have a lien placed on the house to recoup the money owed.

As you can see, the choice you make could have a large impact on your home and your life. In deciding whether to add your child’s name to the deed to your house, it is important to consider the worst thing that could happen: losing your house or your money because of your child’s bad credit, negligence, or divorce. Estate planning can be a complicated and confusing process, if you have any questions contact the Huntsville estate planning attorneys at Martinson & Beason, P.C. today.

For more information on our Estate Planning services, see our Huntsville Probate and Estate Planning Video.

Source: “How to Avoid Ancillary Probate,” by Julie Garber, published at