15 Dec Should I add my daughter’s name to my home’s deed?

Q. I am a single retired parent to an adult daughter who is an only child. The home I currently reside for the last 26 years still has a mortgage and the deed is in my name only. I have a will that states everything is left to my daughter, and then to my grandson if she proceeds me in death. Should my daughter be added to the deed? Can she just sell the house when I die or does she need to go before a judge?
— Planning

A. We’re glad to see that you’re planning for your loved ones when you’re gone.

In New Jersey, there should be no need to go before a judge to probate your estate.

Let’s take a closer look.

In estate planning, there are two big questions to ask about the disposition of your house, said Nancy Heslin Reading, an estate planning attorney with Reading Law Firm in Newton.

First, she said, there would there be substantial capital gains if you add your daughter to the deed prior to death, she said.

Second, Reading said, if you end up needing Medicaid, would you be okay with Medicaid placing a lien against your house after you pass for the value of the services they provided?

The answer to each of these questions is very fact sensitive, she said.

“Broadly speaking, where a home has been owned for a long time as is the case here, I always like to see my clients preserve the step-up in basis for tax purposes that occurs if the real estate is still in my client’s name at his or her passing,” she said. “Whether that step up is preserved depends on how your daughter is added to the deed and this is extremely important.”

Adding her as a joint tenant or tenant in common will not get the job done, she said, so you should talk to a real estate attorney who is well versed in the capital gains tax ramifications before making a decision. An elder law attorney or tax attorney should be able to help as well, she said.

Reading said she prefers transferring the remainder interest in the property to the child and withholding a life estate for the senior. That preserves the step-up in basis at death, she said.

It can get complicated when there is an outstanding mortgage, she said, so you should speak to an attorney.

Next, Medicaid planning.

“If your health and finances are such that it is unlikely you will need Medicaid assistance in the next five years, you may be able to defeat a Medicaid lien on your home after you pass by transferring the remainder interest to your daughter now and withholding a life estate,” Reading said. “This is a very complicated, fact sensitive solution however, so definitely consult with someone who specializes in this area of the law, usually an elder law attorney.”

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This story was originally published on Dec. 15, 2020.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.