{"id":2898,"date":"2023-04-07T11:10:44","date_gmt":"2023-04-07T15:10:44","guid":{"rendered":"https:\/\/www.deeds.com\/articles\/?p=2898"},"modified":"2024-04-25T23:17:38","modified_gmt":"2024-04-26T03:17:38","slug":"warning-when-not-to-sign-over-your-deed","status":"publish","type":"post","link":"https:\/\/www.deeds.com\/articles\/warning-when-not-to-sign-over-your-deed\/","title":{"rendered":"Warning: When Not to Sign Over Your Deed"},"content":{"rendered":"\n
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Transferring the deed to your home is a simple matter. Generally, you just have to find the current deed<\/a> to your home, then get the right deed form<\/a> to write up your new deed to convey to another party, and take the document to a notary. Then your signature can be notarized and the deed can be filed.<\/p>\n\n\n\n

But it\u2019s best not to rush in. Some homeowners later regret signing over their deeds.<\/p>\n\n\n\n

Let\u2019s look at reasons not to transfer deeds too quickly \u2014 and how best to proceed when you do.<\/p>\n\n\n\n\n\n\n\n

Deed Dos and Don\u2019ts<\/h2>\n\n\n\n

Let\u2019s consider some good reasons to sign over your home to somebody else. And then some good reasons to think again before you sign that precious paper away. Also, we\u2019ll note what your other options could be.<\/p>\n\n\n\n

Some parents give their homes to people near and dear to them. Or maybe, facing financial stress, they hand a deed to someone who promises to save them from a mortgage default.<\/p>\n\n\n\n

Before we go on, it\u2019s worth noting that the IRS is very interested in property transactions. For example, there\u2019s a gift tax<\/a> when real estate is freely given. Even if the gift qualifies as exempt from tax, reporting a transfer of assets is important.  <\/p>\n\n\n\n

OK, let\u2019s move on to the big reasons you might want to pass your house deed to someone else.<\/p>\n\n\n\n

Want to Avoid Putting Your House Into Probate After You Pass Away? Consider This.<\/h2>\n\n\n\n

Probate can be your friend. If you bequeath (will) your home to loved ones, and they receive it through probate when you die, they\u2019ll have the so-called stepped-up tax basis<\/em>. That\u2019s a great advantage to have. The rise in your property value during your time of homeownership won\u2019t count as taxable gains.<\/p>\n\n\n\n

In contrast, if you quitclaim the home to your loved one while you\u2019re alive to keep the home out of the probate court after your death, here\u2019s the rub. Quitclaiming or giving someone a home is a taxable event. And we\u2019ve all seen how homes can rise in value. Again, with the step up<\/em> in tax basis that leaving your home in a will offers, none of the value gain will be taxed if your child inherits the house.<\/p>\n\n\n\n

Key IRS Provision:<\/em> <\/strong>The Internal Revenue Code\u2019s Section 2036<\/a> says if you\u2019ve kept a life interest in the property (which comes down to things like decision-making power and the prerogative to keep living there), the home would still go to probate. You might have passed the deed along, but it wasn\u2019t necessarily a completed gift. Think of it as the tax code saving you from your own mistake.<\/p>\n\n\n\n

So, are you thinking of staying in the home but transferring its deed? If so, what if the person to whom you give the deed later runs into unexpected legal or financial stresses, medical hardship, or divorce? Then, the home you\u2019re still living in could be at risk of claims, lawsuits, or liens.<\/p>\n\n\n\n

As you can imagine, there are better ways around probate. We\u2019ll talk about them in a moment.<\/p>\n\n\n\n

A \u201cPocket\u201d Deed? Forget About It.<\/h2>\n\n\n\n

If you\u2019re thinking of giving a deed to someone close to you to hold just in case something happens to you, know the risks:<\/p>\n\n\n\n