Cincinnati, Ohio Estate Planning

Can I Add an Adult Child to the Title of a Home?

“I have a house with a mortgage that I purchased a little over a year ago. At the closing, I asked if I could put my daughter on the deed with me. However, the mortgage company wouldn’t allow it. I don’t want her to have to go through probate, because this is my only asset. Is there a way I can leave the house to her, so she can sell it and pay off the mortgage?”

It’s surprising that the lender wouldn’t allow this 77-year-old widowed woman to add her daughter to the title of her your home, says The Ledger’s recent article “Leaving your home to a family member? Consider these options.” Typically, the mortgage lender likes to make sure that the borrower on the loan is the same as the owners on the title to the property. However, if a senior wanted to add her daughter, it’s not uncommon for a lender to allow a non-borrower spouse or child to be on the title but not on the loan. When the lender permits this, all the loan documents are signed by the borrower and a few documents would also be signed by the non-borrowing owner of the home.

In this situation where the mother closed on the loan, and the lender refused to put the daughter on the title to the home, there are a few options. One option is to do nothing but be certain sure that there’s a valid will in place with instructions that the home is to go to the daughter. When the mother passes away, the daughter would have to wait while the will is probated, then transfer the title to her name or sell the place. The probate process will increase some costs and can be a little stressful, especially if someone is grieving the loss of a family member.

A second option is for the mother to create a living trust and transfer the title of the home to the trust—she would be the owner and trustee. The mother would name her daughter as the successor beneficiary and trustee of the trust. Upon the mother’s death, the daughter would assume the role of trustee.

The next option is a transfer on death (or “TOD”) instrument. Some real estate professionals don’t like to use this document. It may not be acceptable depending on state law, but the TOD would allow the mother to record a document now that would state that upon her death the home would go to her daughter.

Finally, the mother could transfer ownership of the home to her daughter and herself with a quitclaim deed to hold the home as joint tenants with rights of survivorship. Upon mother’s death, the home would automatically become the daughter’s home. However, this type of transfer of the home might trigger the lender’s “due on sale” requirement in the mortgage. Thus, if the lender wanted to be a stickler, they could argue that the mother violated the terms of that loan and is in default.

It is also worth mentioning that there may be tax consequences for the daughter. If the mother goes with the last option and puts her daughter on the title to the property, she’s in effect gifting her half of the value of the home. This may cause tax issues in the future, because the daughter will forfeit her ability to get a stepped-up basis. However, if the daughter gets title to the home through a will, the living trust or the transfer on death instrument, she’ll inherit the home at the home’s value at or around the time of the mother’s death (the stepped-up basis). You should work with an experienced Cincinnati estate planning attorney to get the best advice.

Remember: “An ounce of prevention is worth a pound of cure.” When making your estate plans or when probating an estate or administering a trust, do not go it alone. Be sure to engage a Cincinnati estate planning attorney.

For more information about estate planning, probate or trust administration in Cincinnati (and throughout the rest of Southwest Ohio) and to review free resources regarding estate planning, probate or trust administration, visit my website. If you have questions regarding this article or a particular legal matter, feel free to contact me at 513-399-PLAN (7526).

Reference: The Ledger (Jan. 11, 2020) “Leaving your home to a family member? Consider these options”

Cincinnati - Seek legal advice before putting assets in joint tenancy

Putting your house or any asset in joint tenancy with a child and giving rights of survivorship has legal consequences that few people know.  Yet in my experience, it is not uncommon for seniors in Cincinnati who rely on their children for assistance to add a child’s name to bank accounts, brokerage accounts, deeds and other property without realizing the significance of their action or how it alters their estate plan.   

It is fairly common for a senior parent to put a child’s name on one or more asset.   Doing so enables the child to write checks, call a broker and assist with account transactions, making matters more convenient for an aging parent. 

However, in Ohio, putting an asset in joint tenancy with rights of survivorship is conclusive evidence of an intent to transfer a survivorship interest in the balance of the account's assets after death of the parent.  It basically tells that child, “I want you to have this asset when I’m gone.”  Such transfers can raise problems:  

1.  If after the transfer occurs, your child is sued, goes through a divorce, has a tax lien, loses a job or declares bankruptcy, you may find that your child's creditors are now joint owners.  In fact, these creditors may be able to foreclose on your assets to get at your child's fractional share. 

2.  Transferring an interest in an asset, in excess of $13,000 per person, in joint tenancy with a child or your children can potentially create a taxable gift under IRS regulations.   

3.  When you sell the home, you may be only able to use your primary residence exemption (up to $250,000 of the gain on the sale) only on your fractional share. Your children may have to pay long-term capital gains on their shares, which could have been avoided if the house was still titled just in your name. 

4.  Following your death, the probate attorney advises all the children that any child with joint tenancy owns that asset and that the other siblings have no interest in it.   Thus, if you add only one child’s name to the account or asset, that child is the beneficiary and legal owner.  The other children likely have no right to that asset under Ohio law, even if your Last Will and Testament provides for an equal division of the assets between the children.  

Creating a joint with survivorship interest with a child can thus cause numerous unintended consequences.  There are many alternative ways that a parent can arrange for a child to help them manage their assets. An estate planning attorney who has worked with many families can help you avoid the issues involved with placing assets in joint tenancy with a child.  That is the best way to assure your piece of mind – and your children’s financial future.

If you have any questions about any of the information contained in this blog, see my estate planning website or contact Cincinnati attorney David H. Lefton at 513-399-PLAN (7526) or by email at dhl@bpbslaw.com.