When it comes to owning property, you may want to share that responsibility or privilege with someone else, perhaps a family member or a friend. Adding someone’s name to the title of your property may seem like a straightforward process, but there are various tax and legal consequences you should be aware of. In this article, we will explore these implications and shed light on what to consider before making such a significant move.
For a more detailed discussion, we recommend this insightful article by SmartAsset.
One immediate concern when adding someone’s name to your property deed is the gift tax. If the value of the share of property you are giving exceeds the annual gift tax exclusion ($15,000 as of 2022), you may be responsible for paying gift tax or utilizing part of your lifetime exemption.
Capital Gains Tax
When the person whose name you’ve added decides to sell the property in the future, they might be subject to capital gains tax. The tax rate will depend on the difference between the selling price and their basis in the property, which is often the original purchase price.
Property Ownership Structure
Adding a name to a deed changes the structure of property ownership. Different ownership structures, like joint tenancy or tenants in common, come with distinct rights and responsibilities. Make sure you understand these differences before taking any action.
Once someone else’s name is added to the deed, they also become responsible for the property, including its debts and liabilities. If the property incurs debt or faces a legal action, both parties will be accountable.
Future Sale or Transfer
Adding another name can also complicate matters if you decide to sell or transfer the property in the future. Both parties must agree to the sale or transfer, and disagreements can lead to legal issues.
Adding a name to a property deed is a decision that should not be taken lightly. It has both tax and legal implications that can impact your financial situation and future planning. Always consult a tax advisor and legal expert before making any changes to property ownership.
If you’re considering adding someone’s name to your property deed and need professional advice, Shah Total Planning is here to help. Our team of experts in wealth management and law can guide you through the tax and legal complexities to make the best decision for your situation. Don’t hesitate to reach out to us for a personalized consultation.
Disclaimer: This article is for informational purposes only and does not constitute legal or financial advice. Always consult with a qualified professional for specific advice tailored to your individual needs.