Can You Quitclaim Property Rather Than Leaving it In a Will?
It’s common for people to use wills or trusts to leave behind property to loved ones. However, there are other options available, such as gifting property or using a quitclaim for real estate.
You do have the ability to deed your property to others during your life. People sometimes refer to that as quitclaiming property, which involves simply signing a certain kind of deed that transfers the property over to your chosen beneficiary. You must own the property yourself outright to be able to do this. Once you’ve completed the process, you will no longer be the owner of the property. Ownership gets passed to the named beneficiary. But, to be clear, any sort of deed transfers real property to others.
Is this a good idea?
Of course, just because you can deed away property as an alternative to leaving it behind in a will doesn’t mean you should. There are going to be circumstances in which it is not financially wise to do so.
For example, if the property has gone up in value since you acquired it, it might be better from an income tax perspective to leave it in a will or trust rather than transferring it while you’re alive. This is due to the tax basis of the property, the value from which you determine your taxable profit upon the sale of the property.
Any time you deed away property, the tax basis is the amount of money you paid for that property. If the person to whom you transfer the property later decides to sell it, they will have to pay tax on all profit that exceeds that original purchase price, with some adjustments for home improvements. However, if you leave the property to your chosen heir in your estate plan, the basis instead becomes the property at your death rather than at the time of purchase, resulting in a much lower tax bill if your chosen heir decides to sell it.
For more tips for transferring real estate in your estate plan, whether by quitclaim deed or otherwise, consult a knowledgeable Tampa estate planning lawyer with BaumannKangas Estate Law.