Don’t Add Someone To Deed Of Your Home

By Jaclyn Quinn, Esq.

Delaware Community Reinvestment Action Council, Inc.

Through DCRAC Law’s Estate Practice, we regularly encourage homeowner clients to plan for transferring their property to their loved ones after they pass, and so the topic of deed transfers and adding someone to a deed comes up often. If you’re in this planning stage, it’s worth knowing what you’re getting into before making such a major decision.

A deed is a publicly recorded document showing ownership of land. All of the deeds are on file with the county Recorder of Deeds Office throughout the state of Delaware. If you own land, including a home, you can actually search through the deed records online or in person and view a copy of your deed; when you bought your property, the deed transferred to you.

There are a few different types of ownership, though: Sole Owner, where one person owns the property; Tenants in Common, where each named party owns a share they control; and Joint Tenants with Right of Survivorship, where the last person living will be the sole owner of the property. There’s also Tenants by the Entireties, a special type of ownership reserved for married couples similar to Joint Tenants with Right of Survivorship, wherein the surviving spouse will own the property solely until their death. 

When determining their estate plans, parents and others with succession in mind often ask me if they should add an adult to their deed. This is not a question to be taken lightly—and I usually suggest the answer is no, for a host of reasons. 

Ownership rights

Once a person is added to a deed, the process is not reversible. For example, if a parent adds their adult child to the deed, and then years down the road changes their mind, there’s no recourse unless the child signs their ownership rights back. Furthermore, once a person owns property through a deed transfer, they have rights to that property, and any future property decisions would necessarily then include the new owner. Family situations and relationships change, so this potential for conflict needs to be considered.

Property taxes

If the original owner receives any type of discount on property taxes, a change in ownership by adding another party to the deed could affect the discount or make the entire property ineligible. That may or may not be a dealbreaker, but deed holders should absolutely consider such consequences before taking this step.

Capital gains tax

The tax position of the property and potential capital gains is also a question when adding someone to a deed. If, for example, Aunt Rita adds her nephew Joe to her deed so he can take over and sell the property after she passes, Joe takes on the same cost basis in the property as Aunt Rita, and any earnings from selling the house would be fully taxable for Joe (unless he meets an exception). Whereas if he receives the property through a will or revocable trust, the calculations are different and would leave Joe with far less capital gains to contend with.

Intended final disposition

 If a homeowner wants to pass their property to three children, adding just one child to the deed—even if it’s the “responsible one” who would follow through on their wishes—would be the wrong move. It introduces potential for personal liability if the newly added owner has a lawsuit against them, or if they have their own will leaving the property to others and neglect to pass ownership of the deed to the other siblings before their own death. Another possible issue is that one party could be left with tax consequences while not realizing the full benefit of the asset. Lastly, this type of succession plan is not legally enforceable but rather based on the word and good will of the newly added owner. 

For all of these reasons, I often urge property owners to consider passing real estate through a trust, rather than adding someone to their deed, and avoid the property’s passing through probate. While each ownership question merits examination on a case-by-case basis, simply giving up ownership is rarely if ever the right course of action until all these considerations are fully vetted. 

If you need legal advice, Jaclyn Quinn is licensed to practice law in Delaware and she and her colleagues at the Delaware Community Reinvestment Action Council are available to assist. For more information, or to schedule a consultation, please call 302-298-3251 or email Jaclyn at [email protected]. For more information, visit dcrac.org.

Bio

Jaclyn Quinn, Esq. joined the Delaware Community Reinvestment Action Council (DCRAC) in 2011, first as a volunteer, then as staff. In 2014 Jaclyn opened and grew her private practice until 2019, when DCRAC Law opened to the community. DCRAC Law is a nonprofit law firm providing tax, title, and other legal services to those unable to pay market rates. 

Jaclyn graduated with a B.A. in Political Science from The College of New Jersey before moving to Delaware to pursue her J.D. at Widener University- Delaware Law School. She was admitted to the Delaware Bar in 2012, and is also barred in U.S. Tax Court and U.S. Immigration Court. She has volunteered with the Office of the Child Advocate, DVLS, and assists as pro bono counsel in a variety of cases.

Jaclyn Quinn, Esq.      Delaware Community Reinvestment Action Council (DCRAC)

302-298-3251     [email protected]      www.dcrac.org

@dcracdelcra on instagram & @DCRACDelCRA on facebook

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