Adding a child to your deed?

Summary from our Youtube video “Watch this BEFORE you add a child to your Deed | Understanding the tax ramifications":

1. Common Reasons for Adding a Child to a Deed
   People often add a child to their deed to avoid probate, give control of the property, gift a home, or for Medicaid planning.
2. Avoiding Probate
   Setting up a deed as joint tenants with rights of survivorship can avoid probate. However, Georgia offers a Transfer Upon Death (TOD) deed as an alternative.
3. Transfer Upon Death Deed
   The TOD deed allows beneficiaries to inherit property without probate, but the transfer must be claimed within nine months of the owner’s death. The owner can also change beneficiaries anytime while alive.
4. Giving Control of Property
   Instead of adding a child to the deed, control can be granted through a trust or a financial power of attorney, avoiding potential tax issues.
5. Gifting a Home
   For parents wishing to gift a home while alive, using a tenants-in-common deed (e.g., 99% parent ownership, 1% child ownership) can minimize future tax liabilities.
6. Medicaid Planning
   Adding a child to the deed may protect the home from Medicaid claims during the Medicaid five-year lookback. Legal advice is essential for this option.
7. Tax Implications of Adding a Child to the Deed
   If a child is added to the deed, they inherit the property’s original cost basis (carryover basis), potentially leading to high capital gains taxes when the property is sold.
8. Step-Up Basis Advantage
   If a child inherits the property after the parent’s death, they benefit from a step-up in basis. This adjustment reduces or eliminates capital gains taxes when selling the property.
9. Illustrative Tax Scenarios
   A 50/50 ownership split could result in $51,500 in taxes, while a tenants-in-common deed with 99%/1% ownership reduces taxes to around $1,030. Proper planning can save significant amounts.
10. Importance of Professional Advice
    Consulting attorneys and CPAs is crucial for understanding tax and legal ramifications when adding a child to a deed. Incorrect decisions can create substantial tax burdens for heirs.

This comprehensive video emphasizes careful planning and professional consultation to avoid costly mistakes while transferring property ownership.