THE DANGERS OF ADDING SOMEONE TO THE TITLE OF YOUR REAL ESTATE

Almost daily, we receive calls from people across the CSRA requesting “I want to add someone to my deed.”  What they are actually requesting is to add someone to the title of their real estate.  The reasons often vary when they are making such a request, such as self-attempting medicaid clawback provisions, worried about financial strains or resources, or they just simply want to gift land to a loved one.  While we are happy to oblige with preparing a new deed to gift the property entirely or to simply add a name to the title, there are a number of considerations everyone should consider before adding someone to your real estate title in Georgia and/or removing yourself from title entirely.

Adding someone to the title of your real estate might seem like a straightforward decision, especially if it's for a loved one or a trusted friend. However, this action can have significant and often unforeseen consequences. While we are not offering you personal legal advice in this blog, here are some dangers we urge you to consider before making such a decision:

Loss of Control

Once you add someone to the title of your property, you no longer have full control over it. Any decisions regarding the property, such as selling, refinancing, or making major changes, will require the consent of the co-owner. This can lead to conflicts and complications, especially if the co-owner's circumstances or intentions change over time. For instance, if you want to sell the property but the co-owner disagrees, you could be stuck in a stalemate. Additionally, if the co-owner decides to mortgage their share, you could find yourself dealing with unexpected financial obligations.  Or conversely, if you need to get a mortgage on the property for any reason and they are unwilling to sign the security deed, you could find yourself in a bind financially because the Lender may not accept only a partial share of the property as collateral.

Legal and Financial Implications

Adding someone to your property title can have legal and financial ramifications. For instance, if the co-owner faces legal issues, their share of the property could be subject to claims by creditors or involved in legal disputes. This means that your property could potentially be at risk if the co-owner has outstanding debts, liens, or becomes embroiled in a lawsuit, which can include divorces. Furthermore, if the relationship with your loved one sours, you might find yourself in a costly and stressful legal battle to resolve ownership issues. Legal disputes over property can drag on for years, consuming both emotional and financial resources.

Furthermore, if you may enter into a nursing home or long-term care facility within roughly five years of the transfer in Georgia, you may find the transfer to be unfruitful and it can potentially put the property in danger of a lien after you pass or entirely void your eligibility for medicaid.  If this is something that could apply in your situation, it is vital you speak with an Elder Law Attorney, experienced in medicaid and elder law planning, prior to making this decision.

Tax Consequences

Transferring a portion of your property to another person may trigger tax consequences. This could include gift taxes, which can be substantial depending on the value of the property transferred. For example, if you gift a significant portion or all of your property, you might be liable for gift taxes, which could amount to thousands of dollars. Furthermore, the new co-owner might face capital gains taxes if the property is sold in the future. These tax implications can be complex and may require the assistance of a tax professional to navigate.

Impact on Estate Planning

Adding someone to your property title can complicate your estate planning. It may inadvertently disinherit other potential heirs or create disputes among family members. For instance, if you add one child to the title but not another, it could lead to feelings of favoritism and disputes among siblings after your passing. It could also violate a Trust Agreement if you already have a trust established.  It's essential to discuss your intentions with an estate planning attorney to ensure that your property is distributed according to your wishes. Proper estate planning, and regular estate planning reviews, can help mitigate these issues, but it requires careful consideration and professional guidance.

Potential for Loss

If the person you add to your property title encounters financial difficulties, such as bankruptcy or divorce, your property could become entangled in their financial problems. This could lead to the forced sale of the property or other legal actions that might not be in your best interest. For example, if the co-owner declares bankruptcy, their creditors could force the sale of the property to recover debts. Similarly, if the co-owner goes through a divorce, their share of the property could be considered a marital asset and subject to division in the divorce settlement.

Emotional Strain and Relationship Impact

Adding someone to your property title can also put a strain on your relationship with the person. Financial matters often lead to emotional stress, and disagreements over property management, including the payment of mortgages, liens, and/or taxes, can sour even the strongest relationships. It's important to consider the potential impact on your relationship before making such a decision. Open and honest communication is crucial, but even with the best intentions, conflicts can arise.

Alternatives to Consider

Before adding someone to your real estate title, consider alternatives such as creating a will or establishing a trust. These options can provide you with more control over your property during your lifetime and ensure that it is managed and distributed according to your wishes. A will allows you to specify how your property should be distributed after your death, while a trust can provide more detailed instructions and management options including retaining control during your lifetime as well as after your death. Both options can help you avoid the pitfalls associated with adding someone to your property title.

Professional Guidance is Essential

Given the complexities and potential risks involved, it's crucial to consult with legal and financial professionals before making any decisions. An attorney specializing in real estate or estate planning can provide valuable insights and help you explore all your options. Similarly, a financial advisor can help you understand the tax implications and other financial aspects of your decision.

While adding someone to the title of your real estate might appear to be a simple solution, it is fraught with potential risks and complications. It is crucial to thoroughly understand these dangers and consult with legal and financial professionals, including Your Hometown Attorney,  to explore all your options and make an informed decision. By considering the potential consequences and seeking professional guidance, you can make a decision that protects your interests and ensures the best outcome for all parties involved.  We are happy to discuss many of the items contained herein with you and when you are ready to make the transfer, we are ready to make the process efficient and seamless.