Should I add my adult children to the title of my house to avoid probate fees?

The short answer is: it depends on your specific circumstances. Adding an adult child to the title of your home is a risky strategy. For many, the risks often outweigh what you can save in probate fees.

When you add your children to title as joint owners with the intention of making them a genuine beneficial joint owner, the property would automatically pass directly to them when you die. The asset wouldn’t be considered part of your estate, so your estate would avoid probate fees (currently about 1.4% of the property's value). While the prospect of avoiding a hefty probate bill may seem tempting, there are risks to consider:

• Tax liabilities. If your home is your principal residence, you don't pay capital gains tax on it. But adding a child to title makes them part owner. If it's not their principal residence, they could face a huge tax bill when the property is sold or transferred. Property transfer tax and speculation tax may also come into play.

• Loss of control. Once your child is on title as a true owner, you are gifting them an interest in the property now, and making them a co-owner. Therefore, you can't sell or mortgage the property without their agreement and participation. If you need to sell the house to pay for care later, your child could refuse.

• Creditor and family law risks. If your child gets sued, goes bankrupt or gets divorced, their share of your property could be at risk. Creditors or your child’s ex might be able to make claims against it.

• New reporting costs. Recent changes to government rules mean that bare trust arrangements now require annual reporting and filings. These can cost hundreds to thousands of dollars per year, eating into any probate savings. 

A properly drafted will is often safer and gives you more flexibility. Your estate will pay probate fees. But you'll avoid the tax and legal risks that come with adding children to title.

Before making any changes to your property title, make sure to get solid advice from a lawyer and an accountant who understand estate planning and taxes. They can help you understand the risks and figure out the best approach for your situation. Learn more about the risks of adding your child to title by watching our webinar on estate planning outside of a will.