Clients often want to put their children’s names on the deed to their home. They know that the property will not go through probate if they put them in title as joint tenants with rights of survivorship. But this action may lead to unexpected and unintended adverse results.

The typical scenario is that a husband and wife, or the surviving spouse, come in and express a desire to avoid probate. They often ask about putting one or more children on the deed to their personal residence, thinking that this will accomplish their goals of passing the property quickly and inexpensively. Let us consider the consequences that could occur.

First, when you add a person to the deed, unless otherwise expressed, they will be presumed to own a one-half interest in the property. The child will receive your old tax basis in the half they receive, which may lead to an unfavorable tax result. In addition, you will need to file a gift tax if the value of the gift exceeds $18,000, or $36,000 if gifted by a husband and wife. It is unlikely you would be liable for a tax, but the return should be filed.

For example, if you purchased a house for $100,000 years ago and the current value is $300,000, if you gift it during your lifetime, they will have a tax basis of $50,000 on their half. When they receive the balance of the property on your death, they will get a step-up in basis on your half, but not the part you gave them during your lifetime. When sold, they will pay capital gain taxes that could have been avoided.

This result gets even more unfavorable if you give a child your whole property during your lifetime. In the example above, if you give your child the house, they will take your old tax basis of $100,000. If they later decide to sell the house when it is valued at $400,000, they will owe a capital gain tax on $300,000. All capital gains, however, are avoided if the gift is made after your death.

Other unexpected results can occur. If the child added to your deed files bankruptcy, the interest you gave them will be part of the bankruptcy estate and the house might have to be sold to satisfy creditors. There also could be an effort to take the child’s interest if they were at fault in a car wreck. It might require you to buy off the creditor just to stay in your home.

Complications also may arise if the child gets a divorce. A court might decide that the property is separate property of your child, but award more of the marital assets to the other spouse. Even without a divorce, if you decide to sell the house while you are living, the child’s spouse would have to agree to the sale and sign the purchase and sales agreement, the deed and the closing statement. If the child’s spouse refuses to sign, then you have an issue to resolve. If you change your mind, and decide you want the property back, the child, and any spouse, will have to agree to deed it back to you.

It quickly becomes apparent that putting two or more children on the deed expands the complexity of the situation greatly, and you are now increasing the risk of one of the children having creditor claims, divorces or disagreements on selling.

While this discussion has centered around real property, most of these unfavorable results can also ensue if you add your children to your financial accounts, such as checking, savings and stock brokerages. And a co-owner on a bank account, for example, could usually empty the account without your prior knowledge or consent.

Adding children’s names to assets is the do-it-yourself method of handling the transfer of your assets to your loved ones. While it sometimes works, it also can turn into a financial disaster. Fortunately, there are ways to avoid these potential problems. Pay-on-death designations, beneficiary deeds or transfers through a will or a trust may be better options. Sometimes, it is best to set up a limited liability company to hold and administer real property, especially if there are several children involved.

Each situation is different and can only be evaluated as part of an overall plan for your estate.

Stephen F. Aton is a Springfield attorney and owner of Aton Law Firm LLC, practicing estate planning, corporate and real estate law. He can be reached at steve@atonlaw.com.