This one common mistake could cost you half your house and/or half your money. This one common mistake could cost your children a hefty tax bill.
I see people almost every day that have made this mistake and don’t realize the consequences.
What is the mistake? Putting your children on the accounts as co-owners of your accounts or on your deed.
Here are some of the consequences you may not have foreseen:
- If your child gets divorced, do you want their spouse to get half your home and accounts?
- If your child gets in an at fault accident, do you want the other person to get half your home and account?
- If your child gets in IRS trouble, do you want the IRS to put a lien against your house?
- If your child gets in credit problems, even if it isn’t their fault, do you want to have to fight their creditors to keep your money?
- If you want to sell the house, do you want to give half the money to your child?
- If you put your child on the deed to your house
- They will owe capital gains tax on their half based on what you paid for the house
- You’ve just pushed probate off onto the next generation
You have good alternatives to protect your money and home while allowing your children to manage your money if you can’t.