Reasons Why You Should Not Add a Loved One’s Name to Your Deed
The question on whether or not to add a loved one’s name to a title deed is often asked by different groups of home owners. The elderly parent who hopes to bequeath the home to an adult child would assume that adding the name of the child would ensure that the property ownership falls to the child on the parent’s death. Couples contemplating marriage might also think that adding the name of their fiancé or fiancée is a sure sign of commitment and trust. Sometimes a divorced or widowed person might also plan to add the name of the new lover to the deed. Inasmuch as all these group of people may have noble intentions, adding a loved one’s name to the deed poses some serious legal and financial challenges.
Firstly, once you add a loved one to your deed, you will have exposed your property to different types of risks. If your loved one suffers any financial setback and cannot foot his bills or he owes money to creditors, a legal judgment may be entered against him allowing his creditors to come after your home to recover their money. In the State of Maryland, any judgment liens against your loved one will automatically attach to your home the moment you add his or her name to your deed.
Secondly, you might add a loved one to your deed assuming that he or she will reciprocate your love and trust only to end up being hurt. Even if the relationship remains intact, other complications may arise effectively limiting the access and enjoyment of your property. For example, it is impossible to refinance your home unless the co-owner agrees to sign the loan documents. His/Hers credit score will also determine the interest rate at which you will be able to get the loan. If the co-owner’s credit limit is low, then know that you will have to pay higher interest rates on loans taken to refinance your property.
Thirdly, when it comes to selling the co-owned property, the co-owner must be in agreement and he or she must sign all the documents authorizing the sale of the property. Should the co-owner decline to sign the documents, the only ramification is a costly and time-consuming legal battle.
Fourthly, adding a loved one to your deed has adverse tax consequences for you and the co-owner. The act of adding a loved one to the deed is deemed as gifting him or her half the value of the property. Depending on the value and size of the estate, the gift might trigger federal or state gift tax obligations
If your plan is to ensure that your loved one gets to own the gift upon your death, you’d better let him/her inherit the property when you are dead instead of giving him half of the property when you are still alive. Prior to making any decisions on matters real estate in Maryland, it is highly advisable that you seek legal counsel from a Licensed Maryland & Washington DC Real Estate Lawyer. This professional will give you timely and accurate legal counsel and explain the legal ramifications of buying and selling real estate in Maryland & Washington D.C.