Quitclaiming one person off joint tenancy- family

7 Replies

I bought a property with a family member (son) and want to put it just in the sons name

We bought it in 2016 as Joint tenancy.  For him to get loan I put my name on property, but he made all the payments for the property.  Also, I gave him a loan for part of the downpayment that he has been paying me back at 4 %

I wanted to quit claim him off my share. I just wanted to make sure 1. this won't raise property taxes 2. they won't make him do gift tax.

I didn't contribute anything to him except help him qualify for loan and give another loan for downpayment.

@Susan O. - You should speak to a qualified tax expert. I have heard of folks doing what you are suggesting but I am unsure how to do so and the avoid gift tax.

Not sure if this would solve your problem, but putting the property in a trust, then you make the beneficiary anyone you like.  Again, like @Brian Larson said, talk to a good CPA that understands real estate.  This is important, because not all CPAs are versed in the legal and tax issues with real estate, just as not all doctors are podiatrists.

@Susan O. , no, don't take your name off the Deed.  The loan will still be in your name, but you will have zero interest or security backing it up.  That can go wrong  (badly) in several ways, some of which have nothing to do with your son's action or inaction and some that do.

Have him refi and buy you out.  If he is as faithful of a loan payer as you say he is, he should be able to do it.  If not, then it would be unwise for you to give him 100% ownership while keeping your name on the loan. 

Regardless of refi or no refi, it is likely that deeding away your share will trigger a gift tax, which is why he needs to buy your share of the equity out for enough $$$ to be viewed as an "arm's length" transaction.  Why is that important?

The IRS will figure you have a 50% ownership stake in the property, unless you drew up a partnership agreement BEFORE purchasing the unit that specifies you have less of an interest.  They don't have time, ability, or interest to verify who made the payments.  Think about it: from the IRS's point of view, how can you prove your son made the payments with his own money?  Maybe you were slipping him cash under the table to make the payments.  They don't know, they don't care.  Who owned what percentage of the asset is all they can factually verify, and they can verify if that equity sold at close enough to Fair Market Value to be considered an "arm's length" transaction or was the equity gifted?

If you insist on doing it, yes, at least hire a professional (CPA and attorney) so they can set up something to protect you.  There are literally a dozen ways this could turn into a mess worse than it already is.  Sorry to be the bearer of bad news.

Originally posted by @Erik W. :

@Susan O., no, don't take your name off the Deed.  The loan will still be in your name, but you will have zero interest or security backing it up.  That can go wrong  (badly) in several ways, some of which have nothing to do with your son's action or inaction and some that do.

Have him refi and buy you out.  If he is as faithful of a loan payer as you say he is, he should be able to do it.  If not, then it would be unwise for you to give him 100% ownership while keeping your name on the loan. 

Regardless of refi or no refi, it is likely that deeding away your share will trigger a gift tax, which is why he needs to buy your share of the equity out for enough $$$ to be viewed as an "arm's length" transaction.  Why is that important?

The IRS will figure you have a 50% ownership stake in the property, unless you drew up a partnership agreement BEFORE purchasing the unit that specifies you have less of an interest.  They don't have time, ability, or interest to verify who made the payments.  Think about it: from the IRS's point of view, how can you prove your son made the payments with his own money?  Maybe you were slipping him cash under the table to make the payments.  They don't know, they don't care.  Who owned what percentage of the asset is all they can factually verify, and they can verify if that equity sold at close enough to Fair Market Value to be considered an "arm's length" transaction or was the equity gifted?

If you insist on doing it, yes, at least hire a professional (CPA and attorney) so they can set up something to protect you.  There are literally a dozen ways this could turn into a mess worse than it already is.  Sorry to be the bearer of bad news.

Thanks Erik and others

I'm not worried about him having 100% ownership with me still on the loan.  I am going to give him everything at end anyways.

II just want to take myself off title as he's paying for the loan as well i just helped him qualify

Originally posted by @Brian Larson :

@Susan O. - You should speak to a qualified tax expert. I have heard of folks doing what you are suggesting but I am unsure how to do so and the avoid gift tax.

 I actually don't mind gifting the entire thing to him because its a family member.  I only had him on there so i could help him qualify for a loan.  I just want to take myself off of the deed.  

As noted, just quitclaiming your interest in the property doesn't absolve you of responsibility for the debt.

If your son can't qualify on his own for financing, you may have to stay on the property.

Why did you want off the deed?  If it's estate stuff, you can do a Transfer on Death quitclaim.