We get asked this question almost every day:
“Should I add my children to the house deed to save them money and avoid probate later on?”
Our answer is almost always no, and here’s why.
While it might seem like a simple way to avoid probate and ensure a smooth transfer of your home after you pass, deeding real estate to your children during your lifetime can come with serious tax, legal, and financial consequences. In fact, this decision can lead to more problems than it solves.
Potential Downsides of Deeding Property to Children
❌ Loss of Control
Once you deed your home to your children, you no longer own it outright. That means you'll need their permission to sell, refinance, or make major decisions about the property.
❌ Capital Gains Tax Burden
When you gift property during your lifetime, your children inherit your original purchase price (basis)—not the property's current market value. This can result in large capital gains taxes if they sell it later.
By contrast, if they inherit the property after your death, they may receive a "stepped-up basis", significantly reducing or eliminating the tax burden.
❌ Risk of Losing the Property
If your child has debts, legal issues, or files for bankruptcy – now or in the future – your home could be at risk. Creditors may be able to place liens or force the sale of the property.
❌ Medicaid and SSI Penalties
Transferring property within five years of applying for Medicaid can disqualify you from coverage. This is known as the “look-back” period, and it can be financially devastating without proper planning.
❌ Property Tax Exemptions May Be Lost
In some cases, deeding your property to your children could cause you to lose valuable property tax exemptions, such as homestead or senior exemptions.
❌ Limited Flexibility
Changing your mind after transferring the deed can be complicated and costly. Once it’s done, it’s not easily undone.
Smarter Alternatives to Consider
Instead of deeding your property directly to your children, consider these safer, more flexible options:
✅ Wills and Trusts
A well-drafted will or revocable living trust allows you to keep full control of your property during your lifetime while ensuring it passes smoothly to your children after your death, often without probate.
✅ Transfer on Death Instrument (TODI)
In Illinois, a TODI lets you name a beneficiary for your property, while keeping full control during your life. It's also revocable, meaning you can change your mind. However, some risks – such as creditor claims – can still arise. Let’s discuss if this option is right for you.
✅ Life Estate
A life estate gives your children future ownership of the home but allows you to live there for the rest of your life. It’s used in specific cases and comes with pros and cons that we can explain in detail.
Before You Sign That Deed...
👉 Consult With Our Attorneys
Our attorneys, Andrew and Alex, are here to help you explore options that are tailored to your specific situation and Illinois law. Don’t rely on online will or trust forms, they’re often too generic and may not hold up when it counts.
👉 Speak With a Financial Advisor
We’ll work with your financial advisor (or help you find one) to evaluate the tax impact and financial consequences of transferring your home.
Final Thought
Deeding your property to your children might seem like a simple solution — but it often creates more problems than it solves. With the right legal and financial guidance, you can protect your home, avoid unnecessary taxes, and still achieve your goals for your family’s future.