Q&A: Adding daughter as co-owner of mother’s home could trigger costs

Dear Liz: My father passed away last year, and my mother wants to add my name to her house so there is no probate. Do I need to change the title or the deed or both? Are there any negatives to doing so? Also, we already have a durable power of attorney between us. Does that offer me any benefits as far as real estate? What does it offer me in general?

Answer: A deed is the legal document that transfers the title or ownership of a property. Please don’t alter the home’s documents until you consult an estate-planning attorney. Your mother’s desire to avoid the costs of probate could inadvertently trigger much larger costs.

Adding you as a co-owner could mean giving up a big tax benefit, for example. If your mother bequeaths the house to you when she dies, you won’t owe any tax on the gain in the house’s value during her lifetime. If she adds you to the title, she’s gifting you half the house. In that case, you potentially could owe tax on some of that gain even after she dies. If she wants to preserve tax benefits while avoiding the court process known as probate, she may need a living trust.

There could be other complications if you should die or be sued, which is why it’s important to get good advice before proceeding.

As for the durable power of attorney: It isn’t designed to give you benefits. Powers of attorney allow you to make decisions for your mother if she becomes incapacitated. Those decisions need to be in her best interest, not yours.

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