Adding Someone (Who’s not your spouse!) To Your Title

I am asked about adding someone to the title of their property (i.e., Deed) nearly every day. The assumption is that if an heir is already on the title at the time of your death, then they may be able to avoid probate entirely and save money. While the procedure for doing this is straightforward, the consequences that each party assumes are often unintended and severe. Do your research first!

To explain a little about the process, probate is the necessary procedure for administering the estate of a deceased person. During probate, the heirs or family members of the deceased person will present information regarding the estate (i.e., Was there a Will? What assets were owned? Who are the heirs? etc.) and all potential heirs sign the application. If one was not already identified in the will, they will also request that an executor or administrator be appointed to oversee the affairs of the estate. The judge will then review this information and make a ruling, oftentimes within one or two months.

Put bluntly, this is not a difficult burden to satisfy and is already required for every estate.

So why does this come up so much? In most cases, the person asking recently experienced probate with another family member and hope to simplify this for their own heirs. Their focus is on Georgia Statute O.C.G.A. 44-6-190 – Joint Tenancy with Survivorship.

In Georgia, parties can hold title jointly one of two ways – Tenants in Common (TIC) and Joint Tenancy with Right of Survivorship (JTWROS). Upon your death, property owned TIC goes into your estate, while property owned JTWROS would transfer to the surviving property owner – this avoids probate altogether! Faced with the option of avoiding probate, you can see why many people are interested in this option for their own family. Basically, all you have to do is call an attorney and pay a small fee, and now they don’t have to worry about probate.

But wait, there’s more!

As mentioned above and as I explain below, though the process is simple but the consequences can be severe as I explain below.

1. Gift Taxes: Though I will insist that you rely on the advice of Alicyn on all things tax-related, the IRS states this about gifts: “The general rule is that any gift is a taxable gift.” Though Alicyn can navigate the different options available to you specifically, equity provided via deed would fall under this general rule and you must plan for it…preferably in advance of recording a new deed.
2. Due on Sale Clause: All mortgages have language regarding the “Due on Sale Clause.” This is a restriction that requires that the loan be repaid immediately in the event any portion of the property is conveyed, even if you are just adding someone to title! For more information, please see the Garn-St. Germain Depository Institutions Act, a section of which made due-on-sale clauses federally enforceable.
3. Title Insurance: This can potentially invalidate the Title Insurance Policy that you paid at closing.
4. Minors: Adding someone to your title who is under 18 years old would require a court to be involved in the event of a sale or refinance, which can be costly and delay closings significantly.
5. Estate Taxes: Again giving deference to your tax advisor Alicyn, adding someone to your deed could affect the benefits of inheriting the property upon your death. Both the “stepped-up” cost basis and the estate tax exemption could be forever lost to your heirs.

As an example, a generous grandfather started planning his estate and decided to put his grandchildren on the titles of more than 20 properties that he had accumulated over his lifetime. Upon his death, his grandchildren (and their accountants) realized that their cost basis was not the current market value (i.e., stepped up cost basis), but instead what he paid for each property originally. In this example, the grandfather’s cost basis for all the properties was just over $100,000, while the properties were worth over $1M at his death. Though they didn’t have to wait for probate before selling, I assure you they would have all happily waited to avoid having nearly $900,000 in taxable gain!

6. Practical Considerations: Even if you can solve for the issues explained above, who’s property is this anyways?! The reality is that when you add someone to your property title you are no longer the sole owner. The person you’ve added must be included in any decisions you make about the property like selling, refinancing, subdividing – choices that would have otherwise been solely your responsibility. Here are a few other items to consider:
   1. All property owners must sign closing papers – I’ve seen closings where there are nine sellers in different parts of the country.
   2. As parents age, the children (also typically in different parts of the country) may begin to feel they know what is best for (or judge!) their parent(s) and refuse to sign.
   3. A lien against any property owner attaches to the property (i.e., lawsuits, divorce, HOA payments, credit cards, etc.).
   4. A refinance could impact the ability of any owner to obtain a loan as this is shown as an asset/liability.

So, when does it make sense to add someone to your title to help avoid the possibility of probate? I would consider this a good idea for:

• All married couples (they are exempt from both the Due on Sale Clause and gift taxes, and the practical considerations are reasonable)
• Joint property owners (i.e., not a gift)
• Those who have decided on this option only after carefully weighing the risks highlighted above with the input from their advisors. Good luck and stay safe!

Christian Ross, Esq. | Campbell & Brannon, LLC | 770.321.0222 | cross@cb.law

Christian Ross is an Attorney licensed in both Georgia and Florida and specializes in both residential and commercial real estate. With his original goal of community involvement and education, Christian remains incredibly passionate about teaching.  He frequently shares his lectures on both video and audio platforms and has a library of videos and podcasts available for free on YouTube, and on the Campbell & Brannon website. A frequent guest speaker at large forums, Christian has been a guest with the Atlanta Realtors Association, Cobb Association of Realtors, The Southeast Residential Real Estate Trade Show and at the Atlanta Economic Summit.

by: CNB Blog