Whether you're a parent of a youngster or your kid is all grown up, you probably think about planning for your family's future. The largest investment in your life will likely be your home or other real estate. In the estate planning process or to take care of your child's immediate needs, you can transfer a real estate title to your child by using a quitclaim deed. While these types of transfers occur commonly, they can carry tax implications.
The person who owns a piece of property is said to "hold the title." However, the title is not really a physical document. It's actually a record or report of the transactions that took place regarding the property, such as deeds, mortgages and liens. The most current deed filed on record determines the owners of the property. As an owner, you can convey your ownership to another person, such as a child. Additionally, you can add a child as a co-owner and retain ownership rights if this option is better suited for your situation.
If you decide to transfer ownership of your property to your child, you must use a quitclaim deed. Contact an attorney to prepare the deed for you or use an online legal service that prepares documents. To complete the deed, you'll need your full name -- and that of any other owner, such as your spouse -- your child's full name, and the property address. If your child is paying you for the home, state the amount for the consideration listed on the deed. However, if the transfer is a gift, a consideration value is not necessary. Once the deed is prepared, you will sign it in the presence of a notary public. In most states, your child won't need to sign the quitclaim deed, but there are some areas where this additional signature may be required.
Recording and Forms
The deed must be filed on public record after it's signed. The county clerk/recorder maintains the real property records for the county. A small fee is charged to record documents; this varies by location. Additionally, your state or county might require a transfer form to be completed and turned in with the deed for recording. After it's recorded, the original deed is returned to your child, because she is now the new owner.
Many states impose some type of real estate transfer tax, which is assessed at the time the deed is brought in for recording. However, many places offer a tax exemption for transfers from a parent to a child. Another tax implication will be on your federal income taxes. If you transfer real estate as a gift, you will be subject to the gift tax. The taxable amount is based on the fair market value of the property as determined by a licensed appraiser. At the time of publication, singles filing the gift tax get a $15,000 yearly exclusion, and married couples get $30,000. To file this tax properly, use Form 709. Copies of the appraisal and deed are needed as supporting documents.
- Thatcher Law Firm: Putting Your Children on Title to Real Estate: Multiple Decision Makers
- National Confrence of State Legislature: Real Estate Transfer Taxes
- Internal Revenue Service: Frequently Asked Questions on Gift Taxes
- LawDepot: Quitclaim Deed FAQ - United States
- IRS: What's New - Estate and Gift Tax
- How to Get a Name Off a Deed
- Trustee Deed Vs. Warranty Deed
- Does a Real Estate Deed Have to Be Filed and Recorded?
- What Are the Tax Consequences of Quitclaiming a Deed to My Son?
- Transfer of an Equity Deed
- What Kind of Deed for a Paid-Off Mortgage?
- How to Change the Title on a Mortgage
- What Is a Non-warranty Deed?