Question: My mother wants me and my sister to add our names to the deed on my mother’s house while she is still alive. How do I do that?
Background: My parents own property in Arkansas which will be deeded to their children upon my mother’s death. My mom wants my sister and I to put the property in our names now – before she dies. I tried to do a quick deed, but the county rejected it saying it could only be done with the assistance of an attorney. How would I go about starting this process and how long will it take?
Loraine’s Answer: There is no such thing as a “quick deed.” There are Warranty Deeds, Limited Warranty Deeds, and Quit Claim (sometimes written as “Quitclaim”) deeds. If this error in your post wasn’t a typo, and if you actually labeled the deed you attempted to prepare as a “Quick Deed,” then you were lucky that the court rejected it. Granting your request may well have created a title problem for yourself and your sister.
If your mother is the current property owner, then she is really the one who needs to see an attorney. She needs to make sure that she is thinking through what she wants to do and that it gets done correctly. As potential beneficiaries of the property, it could actually be better for you and your sister to receive the property at your mother’s death because then you would receive it with a new basis for income tax purposes. If the property has appreciated significantly since your mother originally acquired it, there could be built-in capital gains that she may end up transferring to you and your sister if she transfers the property to you as a gift instead of allowing the property to pass to you and your sister as an inheritance. If she wants to transfer the property now, thinking that she will save you time and trouble after her death, then there may well be better ways to do it that would also let you and your sister receive the tax benefits (and maybe even some creditor and predator protection). If she thinks she may end up needing Medicaid benefits for her own nursing home care, then she needs to be even more careful. If she just gives you the property, she could cause herself to be disqualified from receiving benefits for a long time. Again, there may better ways to handle it.
In short, it is rarely ever a good idea to simply give your children your property. I would urge your mother to see an estate planning attorney who works in the state where she lives. If, after a thorough analysis, it turns out that it really isn’t a bad idea to make the property gift to you and your sister, she should then hire an attorney and have the deed drawn up properly. It doesn’t cost a great deal to do this, and it should let the family avoid the hassles and expenses that can come from a poorly drawn-up deed.
Key Estate Planning Takeaway: Well-meaning parents often decide to add their children’s names to the parents’ real estate while they are living, hoping to reduce time and transfer costs for the children after the parents’ deaths. However, adding a child’s name to a parent’s real estate is rarely a good idea, for a number of reasons, including, but not limited to: ensuring that the children end up having to pay capital gains taxes they could have otherwise avoided if the property is ever sold and preventing the parents from being able to qualify for Medicaid nursing home care benefits if they ever end up needing those benefits. Before deciding to add another person’s name to your real estate, you should consult an estate planning attorney so you can consider all of the factors and decide whether this kind of transfer is really the right thing for you and your family.
This “Q&A with Loraine” blog series features answers from Morgan + DiSalvo Partner Loraine DiSalvo to questions posted on www.avvo.com. A key takeaway from each exchange highlights an important facet of estate planning.