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Why it’s not always smart to put your house in your child’s name

Some people decide to do some “homemade” estate planning and put their house in a child’s name. They figure this will avoid probate and get the house out of their estate for tax purposes. This might be a good idea in some cases. But remember, if you give your house to your child now, any appreciation in the value of the house between now and the time it’s eventually sold will be a capital gain for your child. And if your child doesn’t live in the house as a principal residence for two of the five years prior to the sale, he or she will owe capital gains tax on this increase in value. (And this is just one of the things that can go wrong.) Estate planning is a very complicated field and it’s easy to make a mistake if you try to do it yourself. Tell us your concerns, and we’ll be happy to point you in the right direction.

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