Should I Put My Name on My Parents’ Deed To Protect it From the Nursing Home

April 27th, 2015 by beasleyferber

We are asked this question many times a week. In many cases, the home is the largest asset, and almost everyone wants to protect his or her home from being sold to pay for long-term care. For several reasons, the answer is a resounding NO.

LIABILITY: If your parents put your name on their deed, and you get divorced or sued, guess what… your parents’ house can be attached, or can become part of your divorce settlement! Think about it, if your parents’ house is in your name, it is safe from the nursing home because it is not their asset. However, it is your asset, and, as such, is subject to any creditors or legal issues you may have.

LOSS OF CONTROL: If your parents put your name on their house, they lose all control over it. A simple example will make the dangers of this clear. Say your mother or father puts your name on his or her house. Unexpectedly, you die before your parents, and you have a will leaving everything to your spouse. Since your parent’s house was in your name, it is your asset. At your death, the house becomes the property of your spouse, and he or she is now your parents’ landlord. Suffice it to say that this is not a situation your parents would be happy with.

EXTRA TAXES: If your parents’ house is put in your name, then it can give you extra taxes to pay at their death. Normally, if you inherit your parents’ house at their death, then, for tax purposes, you inherit it for the value at death. When you sell the house, your capital gains are measured from that value, so that all of the growth during their life will never be taxed. For expample, if your parents bought the house for $50,000, and it is now worth $150,000, you inherit it for the $150,000 value. If you sell it for $150,000, then your capital gains tax is zero. However, if your parents put the house in your name during their life, when they die you inherit it for the $50,000 they paid for it, NOT the $150,000 value at death. If you sell it for $150,000, then you get stuck with a capital gains tax on a $100,000 profit. You have just made a large gift to the IRS. Not good planning.

So, if you are thinking about having your name put on your parents’ house, think twice before doing so.

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