Episode Summary:
In this episode of Estate Planning Beyond the Binder, Brian Chew, Managing Partner at OC Wills & Trusts, tackles a common but risky estate planning shortcut—putting children on the title of a home. Brian explains why many parents consider this strategy to avoid probate, but also reveals the serious downsides, including tax consequences, creditor risks, and loss of control. He breaks down California-specific issues such as Proposition 19, the step-up in basis, and property tax reassessments. Brian also outlines safer alternatives, including revocable living trusts, that protect assets while preserving flexibility for parents and tax benefits for heirs.
Key Timestamps:
00:01 – Show introduction
01:15 – Why parents put children on title to avoid probate
03:20 – Risks of unexpected events and joint ownership complications
06:05 – How children’s creditors and lawsuits can endanger property
08:30 – The tax downside: losing the step-up in basis
12:00 – California’s Proposition 19 and property tax reassessment issues
15:40 – Why revocable living trusts are a safer and smarter alternative
18:10 – What to do if you’ve already added children to a title
21:25 – Permanent consequences of property transfers vs. revocable trusts
24:00 – Final thoughts on why control and flexibility matter in estate planning
About the Show:
Estate Planning Beyond the Binder with Brian Chew helps families go deeper than just drafting documents. Each episode offers practical insights into estate planning strategies that minimize taxes, protect assets, and provide long-term security. With over 25 years of experience serving Orange County families, Brian Chew provides trusted legal guidance to help clients make smarter estate planning decisions.
Estate Planning Beyond the Binder – Episode 5
Why You Shouldn’t Put Your Kids on the Title of Your Home
Why do some parents add their children to the title of their home?
Brian Chew explained that many parents consider adding their children to the title as a way to avoid probate. The thought process is that when a parent passes away, the child already listed as a co-owner will automatically inherit the property without court involvement. While this approach may seem simple, Chew stressed that it often creates far more problems than it solves.
What are the risks of joint ownership with children?
According to Chew, joint ownership exposes the property to the child’s creditors, lawsuits, or financial issues. For example, if a child experiences bankruptcy, divorce, or litigation, their ownership interest could be targeted, potentially putting the family home at risk. Parents also lose a degree of control, as any decisions about the property—such as selling or refinancing—would require the child’s consent.
How does adding children to the title affect taxes?
Chew highlighted one of the biggest downsides: losing the step-up in basis. Normally, when heirs inherit property through a trust or probate, they receive a “step-up” in tax basis to the property’s fair market value at the date of death. This drastically reduces capital gains taxes if the property is later sold. By gifting the property during life, parents pass on their original low basis, saddling children with a much larger tax bill.
How does California’s Proposition 19 impact property transfers to children?
Chew explained that under Proposition 19, most property transfers from parent to child trigger a property tax reassessment based on current market value. This can lead to dramatically higher annual property taxes for the child. Only limited exclusions exist, and they often don’t apply if the child does not use the home as a primary residence.
What happens if a child is sued or goes through bankruptcy while on the title?
If a child is listed as a co-owner, their share of the home becomes vulnerable to creditor claims or court judgments. Chew warned that this can jeopardize the entire property, leaving parents without the security they intended to preserve.
What alternatives are safer than putting kids on the title?
Chew strongly recommended using a revocable living trust instead. With a trust, parents retain full control of the home during their lifetime while still ensuring the property passes seamlessly to heirs without probate. Trusts also preserve the step-up in basis and help avoid property tax reassessments, offering a more tax-efficient and secure estate planning strategy.
What if parents have already added children to the title?
Chew noted that once children are added to the title, reversing the decision can be complicated. However, depending on the circumstances, an estate planning attorney may be able to restructure ownership or create new trust strategies. He advised seeking professional guidance immediately to mitigate potential tax and legal consequences.
Why is control and flexibility so important in estate planning?
Chew concluded that estate planning should protect both the family’s financial security and the parent’s autonomy. By relying on trusts instead of risky shortcuts, parents keep control during their lifetime, minimize tax burdens, and ensure heirs inherit in the most efficient and secure way possible.