Estate Planning Mistake: Joint Ownership with Children

Adding your child to the deed of your home might sound like an easy way to avoid probate—but it can open a Pandora’s box of problems. In this video, estate planning attorney Michael Pevney explains why this “quick fix” often backfires for California families.

The Good Intention That Leads to Big Problems

Many parents in California add their children to the deed as joint owners to skip probate court. After all, probate can be a long, expensive, and public ordeal—often taking 1–2 years and costing upwards of $50,000 depending on the value of the home.

But putting a child on the deed doesn’t just simplify your estate—it legally gives them ownership. And that comes with major consequences.

You Give Up Control—Today

Once your child is listed as a joint owner, they have full legal control over their share of the property. That means:

• You need their consent to sell the home

• They can block a refinance or reverse mortgage

• They could sell their share to someone else

• They could force a sale if there’s a disagreement

In other words, what starts as a probate-avoidance strategy can quickly turn into a control crisis.

You Open the Door to Their Legal Troubles

Joint ownership also exposes your home to your child’s legal and financial problems, including:

• Lawsuits: If they’re sued, your home could be dragged into the judgment

• Bankruptcy: A creditor may force a sale to collect what they’re owed

• Divorce: Your home might be counted as part of their marital assets

Even if your finances are solid, their troubles can become yours if they’re on the title.

It Could Trigger a Massive Tax Bill

This is a big one. When a child inherits a home after the parent’s death through a trust or will, they usually get a step-up in tax basis. That means they’re taxed on the home’s value at the time of inheritance—not what you originally paid.

But if they’re already on the deed, they lose that benefit. Instead, they inherit your original purchase price for tax purposes. Here’s how that could look:

• You bought the home for $200,000

• It’s now worth $1 million

• They sell it after your death—$800,000 in capital gains

• At a 20% tax rate, they owe $160,000

That’s a six-figure tax hit that could have been completely avoided with the right estate plan.

So What Can You Do If It’s Already Done?

Unfortunately, you can’t just take someone off a deed unilaterally—they own part of the home. But here are a few potential steps:

• Ask them to deed their share back so you can place the home in a trust

• Convert ownership to tenancy-in-common, clarifying exact shares (not a perfect fix)

• Go to court to force a sale, though this can be costly and contentious

Each option has its own risks and complications. The best move? Avoid this situation altogether by planning properly from the start.

The Better Solution: Use a Revocable Living Trust

A revocable living trust offers the best of both worlds: probate avoidance and full control during your lifetime. Here’s why many Orange County homeowners choose this route:

• Avoids Probate: No court delays or fees for your heirs

• Keeps Control: You retain full ownership and can sell, refinance, or live in the home freely

• Protects from Creditors: Your assets aren’t tied up in someone else’s legal troubles

• Saves on Taxes: Heirs benefit from the step-up in basis and may owe little to no capital gains tax

Creating a trust involves filing a new deed and naming beneficiaries, but it keeps your wishes intact without sacrificing control or security.

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