Buying a home with an ex to pass on to our children

[Christopher Tom]

Hello, so I've been talking with my kids mom about purchasing a home, with the intent on passing it down to our children. I'm not sure if this is a thing that people do, but I figured that I would ask. Would we just purchase the home as joint owners, or would we need to put it under an LLC? Also, we will all be living in the home.

[Joe Splitrock]

Passing it down to your children is great, but be aware that you will not both die at the same time. That means one parent will survive the other, so the children will inherit a portion of the home before they inherit the other portion. There is also a good possibility that one or both of the parents ends up in a new relationship or even married. This creates a couple potential problems. First issue is who lives in the house at that point? If one parent moves out, do they still pay part of the mortgage or do they compensate the other parent for their share? What if the new boyfriend / girlfriend or spouse doesn't like the arrangement? What if they want to sell the house and use the money to fund a new property or retirement? 

I know nothing about your relationship, but I know people well. I have seen so many people split up and vow they will never get married again. Most get married or into a serious relationship and the new partner wants to distance from the ex. For that reason, owning the house together will only complicate things. 

It is probably a bad idea to buy the house together, unless you build in a sale provision to the agreement. "If either of us gets into a serious relationship, gets married or moves out, the house is sold and we split the proceeds. The other person agrees to sell and they will not stay in the property." The point is building in an "out clause" so if EITHER of you wants to sell, you BOTH have to sell. You can also create a buy-out provision that stipulates if one wants to sell and the other stays, the buy-out is based on independent appraisal value.

It is unrealistic to think you will both own the house long enough for the kids to inherit. I say that because "life happens". You don't seem to be thinking this all the way through. Maybe the break up is recent, but trust me, people move on over time.