What taxes are owed if I add my children to my deed?
Q.  Homeowner  A. Planning for the future is smart, but you didnt mention your reason for considering the transfer of a full or partial ownership in your home. That makes a difference in how you should proceed. If the goal is to avoid probate when you pass away, then adding children as joint tenants with rights of survivorship will achieve this goal, said Jodi Cirignano, a certified financial planner and certified public accountant with Peapack Private Wealth Management in New Providence. However, there may also be some negative consequences that should be carefully considered, she said. First, if the home has unrealized capital gains when you pass away, only your ownership share receives a step-up in basis, Cirignano said. With a step-up in basis, the cost of your home is increased to its fair market value on the date of death, eliminating any capital gains that accrued from the purchase date, she said. Another tax consideration is the home-sale tax exclusion. If you sell the home during your lifetime, you are eligible to exclude up to $500,000 of capital gains if youre married, or $250,000 for taxpayers filing single, if the home was your primary residence for two of the last five years, she said. If you add your children as owners, and they own other primary residences, they will not be eligible for this tax exclusion when they sell your home, she said. Second, your co-owner(s) could file for bankruptcy or become subject to a creditor or divorce claim, Cirignano said. Depending on state law, a creditor may be able to attach a lien on the co-owners share of the property, she said. Third, if you transfer your entire interest, the new owners have complete control over the home, allowing them to sell it, rent it or even use it as collateral to borrow money, Cirignano said. If you transfer a partial interest, you may need the co-owners approval to take certain actions such as refinancing the mortgage, she said. If you decide to transfer ownership, we recommend that you consult with an estate planning attorney to not only prepare the legal documents, but also to discuss your goals and the implications of the transfer, she said. The attorney would draft the new deed and record the deed with the county office where the property is located.  You or your tax advisor will need to file a gift tax return, Form 709, but there should not be any federal gift tax on the transfer unless your cumulative lifetime gifts exceed the threshold of $11.7 million or $23.4 million for a married couple, she said. Also keep in mind that Medicaid has a five-year lookback period, so if you think you may apply for benefits in the future, speak to an attorney about the implications any action may have. Email your questions to Ask@NJMoneyHelp.com. Karin Price Mueller writes the Bamboozled column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for NJMoneyHelp.coms weekly e-newsletter.