Should You Add Your Children to Your Home’s Deed? Legal Risks to Know

It’s a common question we hear from clients across Monroe, Orleans, and Genesee Counties: “Should I add my child to the deed of my home to avoid probate?” While it may seem like a simple way to pass on your property, and it is often a good technique to use, this move can carry unexpected legal and financial consequences—for both you and your children.

At Klafehn, Heise & Johnson P.L.L.C., we help families make smart decisions about property and estate planning. Before you make changes to your deed, here’s what you should know.

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1. It’s Not Just Your Property Anymore

When you add someone—like a child—as a co-owner of your home, you give them a legal ownership interest. That means:

• You must get their permission to sell or refinance the property.
• Their financial or legal issues (like divorce, lawsuits, or bankruptcy) could impact your home.
• You lose sole control over your property.

Many people don’t realize that simply “adding them to the deed” gives them significant legal power over this important asset.  There are ways to minimize these risks, and so careful planning and drafting is key.

Not sure if this is the right move? Let’s talk.

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2. You May Trigger Gift Tax Consequences

Transferring an interest in your home to a child may be considered a gift under IRS rules. If the value of the interest you give exceeds the annual gift tax exclusion (currently $19,000 per donor and per donee in 2025), you’ll need to file a federal gift tax return.

While you may not owe taxes immediately, the gift will count against your lifetime exemption. Failing to report the gift properly can create problems for your estate or tax situation down the road.  There are ways to minimize these issues, and so careful planning and drafting is important.

We can help you understand the tax impact of deed transfers.

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3. You May Jeopardize Medicaid Eligibility

If you need nursing home care in the future, Medicaid will look back at any asset transfers you made in the five years before your application. Transferring your home—or part of it—to a child during that time could:

• Trigger a penalty period where you are ineligible for Medicaid.
• Force you to cover the full cost of care out of pocket.
• Put your home at risk if proper planning isn’t in place.

Failing to carefully plan for these details is a common mistake that can have devastating financial consequences. Proper Medicaid planning should always be handled with legal guidance.

Talk to us before making any deed changes that may affect Medicaid.

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4. You Could Create Capital Gains Problems for Your Children

If your child inherits the home through your will or a trust, or upon the expiration of your life estate, they’ll receive what’s called a “step-up” in cost basis. This means their tax basis is adjusted to the home’s value at the time of your death—minimizing capital gains if they sell.

But if you add them to the deed now (and don't keep a life estate) and they later sell the home, they’ll pay capital gains tax on the increase in value from when you originally purchased it—not from the date of your death. That could result in significantly higher taxes.

This well-meaning gift could turn into an expensive mistake.

Let us help you avoid costly tax pitfalls.

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5. Better Alternatives Are Available

If your goal is to transfer your home to your children and avoid probate, there are better legal tools available, such as:

• Revocable Living Trust – Keeps the home in your name, avoids probate, and allows for full control during your lifetime.
• Irrevocable Medicaid Trust --  Takes the home out of your name for Medicaid purposes (subject to the 5-year lookback), but still gives you important aspects of control during your lifetime.
• Transfer-on-Death (TOD) Deed – Available in some states (including New York), allows property to pass automatically upon death.
• Life Estate – Lets you stay in and use your home for life while naming your child as the remainderman or future owner.

These tools offer more control, and may, depending on the option chosen, protect or enhance your eligibility for Medicaid, and reduce tax exposure.

Ask us which option makes the most sense for your situation.

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Smart Planning Starts with Local Legal Guidance

Changing your home’s deed may seem simple—but it’s a decision that should never be made without understanding the legal and financial consequences. The right planning approach depends on your goals, family situation, and long-term care needs.

At Klafehn, Heise & Johnson P.L.L.C., we help homeowners across Rochester, Brockport, and surrounding towns in Monroe, Orleans, and Genesee Counties make smart decisions about their property, their estate, and their future.

Before adding anyone to your deed, talk to an attorney who can walk you through the risks and help you make the right choice.

Schedule your estate or property planning consultation today.

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Legal Disclaimer:

This article provides general information about estate planning and property transfers in New York State and should not be considered legal advice. Every situation is unique. For personalized legal guidance, contact Klafehn, Heise & Johnson P.L.L.C. in Rochester, NY. You can reach us here. Portions of this article may be considered ATTORNEY ADVERTISING under the New York State Unified Court System Rules of Professional Conduct (22 NYCRR Part 1200). Prior results do not guarantee a similar outcome.