How to Gift Real Estate to Family
Byline: Chad Nelson, Esq. & Brad Pelletier, Esq.
Estimated read time: 5 mins
Our clients frequently ask whether they can add their child’s name to their deed. The short answer is yes, they can, but whether they should is another matter. Adding a child’s name to your deed, which establishes co-ownership, can introduce risks and unforeseen consequences, so we do not typically recommend it. The same benefits can usually be achieved by other means, such as creating a trust and transferring your property into it.
In this article, we explore the feasibility of gifting property to a family member using the most common type of deed in Rhode Island and Massachusetts (the quitclaim deed) followed by the alternative (commonly recommended) method of establishing a trust.
5 Reasons to Consider Transferring Real Estate to a Trust
There are different types of trusts that offer the same benefits as a quitclaim deed, but which do not come with the risks of co-ownership. By creating a revocable trust and transferring your home (and any other assets you wish) into it, your child can avoid the cost and hassle of a probate court administration upon your passing (benefit #1).
Your child(ren) will also receive a stepped-up basis in the property upon your passing, which in most cases will eliminate capital gains taxes (benefit #2). If you wish to sell your home in the future, you do not need the child’s permission or participation in the sale (benefit #3). While revocable trusts do not offer nursing home protection, irrevocable trusts do (again, without the pitfalls of co-ownership [benefit #4]).
Last, utilizing a trust to accomplish these objectives does not subject your home to the child’s legal rights and liabilities, even if they are the trustee of your trust and are responsible for administering the property (benefit #5).
Although trusts add an additional cost to your estate plan, it is insignificant compared to the cost avoided by not opting for the quitclaim or warranty deed shortcut.
To learn more about gifting or transferring real estate, or determine whether you might benefit from a trust, contact our office for a complimentary estate planning consultation.