03 Jul Can I add my minor daughter as an owner of my house?

Q. Is it possible that I buy a house and co-own it with my daughter who is only 15 years old? I am currently 60 years old. And are there pitfalls to watch out for?
— Homeowner

A. This is a common question.

While it may seem like a simple solution for passing an asset to the next generation down the road, there are many things that can go wrong.

First and foremost, in most states, you must be at least 18 years old to purchase property, said Matthew DeFelice, a certified financial planner with U.S. Financial Services in Fairfield.

So in this case, he said, you could not buy the home with your daughter initially because she would be deemed to lack the mental capacity required to enter into binding agreements under the law.

However, you could purchase the home yourself and then transfer half of the ownership to your 15-year old daughter, DeFelice said, though he questioned the wisdom of such a strategy for multiple reasons.

When you sign a deed adding your child to your property as joint tenants, your child has become a joint owner, DeFelice said.

“If during your lifetime your child ever has difficulty paying their debts, or is forced to file bankruptcy, a court can order your home to be sold,” he said. “If the deed shows one parent and one child as co-owners, the court will take 50% from the sale of the home to pay the child’s debts.”

You have no idea how fiscally responsible your 15-year old will be as a young adult, and you don’t want potential problems of theirs to force you out of a home, DeFelice said.

Other issues could seem extreme, but they’re possible, however distasteful.

“What if she gets into a car accident while driving and kills somebody? Suddenly half of your home is subject to a potential lawsuit,” he said. “Or if she gets married and subsequently divorced in the future, half of your home could be subject to divorce proceedings.”

Another problem is control of the home.

Anyone listed on a deed to a home is an owner of the home, DeFelice said. If you need to refinance the home, sell it, or use it as collateral on a loan in 5 or 10 years, your daughter will need to first approve of your actions and then sign with you on the loan or sale documents.

Or if you decide you want to take her off of the title, she can choose whether she will sign a deed giving you her share, he said. And if she does this, she has the right to claim her share of the sale proceeds.

“You may trust your daughter now, but you have no way to accurately predict what influences she will have in her life as an adult,” DeFelice said.

This extends to the sale of your home after your death.

“If a child is listed as a joint tenant on the home, they legally have the right to keep the home to themselves,” he said. “I have seen some people add a child to their home as a joint tenant, and then tell that child to sell the home after the parent’s death and divide the proceeds of the sale to all of their children equally.”

No matter what you have written in your will or trust, if a child is a joint tenant, they will have the right to keep the home and not share the proceeds of a sale with anyone, he said.

“Once again – even if you know you can trust that child, what happens if they marry someone you don’t trust, and then your child becomes injured and the person you don’t trust becomes their power of attorney or guardian? At that point, someone you did not plan for is in control of your assets,” he said.

Assuming the goal is to make sure the house passes to your daughter cleanly and without hesitation once you are no longer around, the best way to accomplish this is to establish a revocable living trust for which you are the trustee of and your child is the beneficiary of the trust, he said.

“The trust would purchase the home, you would retain complete control, and when you pass away your daughter will then receive the home as the beneficiary of the trust,” he said. “The other advantage of doing it this way is that the house will avoid probate proceedings, which can be time-consuming and expensive.”

As always, you should consult with a qualified estate planning attorney to determine if this strategy makes the most sense for you.

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This story was originally published in July 2024.

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.