Q: My ex-spouse and I live in the same town. He wants to leave his house (which I lived in with him when we were married) to me when he dies. He is thinking about using a quit claim deed form.
Is there a form he can complete before he dies or is there another way that the transfer should occur? And, do we have to go thru a lawyer or can he do it on his own?
A: Your ex-spouse sounds like a generous fellow. He should set up a revocable trust (you can pay for it if he can’t) so that the house automatically becomes yours upon his death. A revocable trust is sometimes called a living trust. In a living trust, you transfer your real estate and title to other property into the living trust. The trust becomes the legal owner of that property but the person that set up the trust is the beneficiary of the trust. As the beneficiary of the living trust, you get all the benefits of ownership, including the right to deduct real estate taxes and interest payments on your personal tax return. But the benefit of the living trust is that upon your death, the trust dictates who will get the property held in the trust. You designate a person that will replace you as the trustee of the living trust and that person has the authority to sell the property in the living trust or transfer that property to the person whom you designated in the living trust.
While you own the living trust, you can make changes to it and even revoke it. But upon your death, the property held in the living trust does not have to go through probate. Not having to go through probate means that your estate does not have to go to court and get a court order approving the sale of property. Avoiding probate can save you quite a bit of money down the line, but those savings will depend on the type and value of property held in the living trust.
Assuming that Congress gets around to fixing the estate tax at some point in time and reinstates the stepped-up basis, you will be able to inherit the property at the then current market value upon his death.
Right now, whether he gives you the property or you inherit it, you’ll get it at his cost basis. If he is going to die soon, then a quit claim deed will work just fine. But the idea of using a quit claim deed now – when he is still living – doesn’t make too much sense. A quit claim deed is generally used to transfer the interest in property from one person to another at the present time.
In some states, you can use a transfer-on-death (TOD) document or deed that would transfer title of the home from your ex-husband to you upon his death. You could consider that option if it’s available to you in your state. Otherwise, transferring title of the home into a trust would be another solution for you. If he were to use a trust, he would still own the property but upon his death, his trust document would instruct the trustee that you would become the owner of the property. He could change his mind in the future, but if he didn’t, you would avoid probate upon his death and become the owner of the property.
You can buy trust forms online for your state. And, you may also be able to buy a transfer upon death deed or quit claim deed online.
Be sure you follow all the directions about having signatures notarized and properly preparing the documents. If a document needs to be recorded, make sure you take all the steps necessary to record the document properly. While many people do this themselves, many don’t do it right causing problems later on. You may want to engage an attorney or title company to help to make sure you do it right.
Remember, a quit claim deed will transfer the interest in a property now, while a living trust will allow you to control the property until your death. You should make sure to plan your estate properly now rather than having the people that inherit your property later find out that your poor estate planning has cost them a bundle.