Optimal Finance Daily - Financial Independence and Money Advice 3433: [Part 2] Transferring a Primary Residence to Children by Sean Mullaney of FI Tax Guy on Legacy Decisions
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Jan 24, 2026 A discussion of pitfalls when adding adult children to a home title, including unexpected tax and legal traps. Risks covered include capital gains before death and loss of control after adding co-owners. Family disputes, creditors, and divorce consequences are explored. Revocable living trusts, wills, and transfer-on-death deeds are presented as safer alternatives to outright gifts.
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Consult A Lawyer Before Changing Title
- Consult a trusted lawyer before putting anyone else on your home's title because transferring interest relinquishes control and creates risks.
- Proceed with significant caution and consider alternatives like trusts to preserve control and flexibility.
Capital Gains Risk Before Death
- Capital gains issues usually disappear at the owner's death due to step-up in basis but can arise if the property is sold during the owner's life.
- A child added to title who isn't an occupant may face capital gains on their share if sold before the owner's death.
File Gift Tax Return When Gifting Interest
- If you gift an ownership interest, file IRS Form 709 to report the gift even if no gift tax is due.
- Don't assume absence of tax: reporting is required and exemptions vary by state and lifetime amounts.