It may seem like a great idea: Parents, either because they want to help their kids out, or to reduce the taxable value of their estate, decide to transfer ownership of their home to their kids. Well, it may seem like a great idea. But it often isn’t.
For starters, parents often don’t realize the security they’re giving up, especially if they plan to continue living in the home. If your child were to get divorced, the ex-spouse could have a legitimate claim on the home. Creditors can come after the home if your child defaults on a loan or loses a legal dispute. Your child could even sell the property without your permission.
“There are few worse things in life than getting evicted by your kids,” says John Collins, a principal at the wealth-management firm Aspiriant.