When it comes to transferring property, many people think, "How hard can it be?" This mindset often leads to using DIY real estate deeds, especially quitclaim deeds, to pass property to loved ones. While this approach seems simple, it can cause major problems in the future. Tyler homeowners should be aware of the potential risks when handling real estate deeds without professional guidance.
A quitclaim deed is a straightforward document used to transfer a property interest from one person (the grantor) to another (the grantee). It's often used between family members to avoid probate or to quickly add someone's name to a property deed.
However, quitclaim deeds come with a major catch: They only transfer the grantor's interest in the property—if any—and offer no guarantee that the title is clear or that the grantor even owns the property free and clear.
Using a quitclaim deed without legal advice can lead to several unexpected issues. Here are some common problems that Tyler property owners should consider.
One of the biggest dangers of a DIY quitclaim deed is discovering later that the title isn’t clear. For example, if you inherit a property and transfer it to yourself using a quitclaim deed, you might believe all is well—until you try to sell it. At that point, a title company could find that the transfer didn’t follow probate procedures, making the title unmarketable. The result? You’re stuck in a legal quagmire that could delay or prevent the sale.
Adding someone to your deed might seem like a way to simplify things, but it can backfire if that person has financial difficulties. Imagine a parent adding a child to their property deed to avoid probate. If that child later faces bankruptcy or a lawsuit, creditors could claim part of the property to cover the child's debts. This could leave the original owner—like the parent—facing the loss of a portion of their home because of the DIY approach. Issues like creditor problems or ownership disputes may also arise when parents add their children’s names to the deed of their home. Read more in our article, Should You Put Your Child’s Name on the Deed to Your House?
Adding someone to your deed can also lead to insurance and tax complications. Once another person is listed on the deed, your insurance company needs to be notified. Failing to do so could invalidate your homeowner’s insurance, leaving your property uninsured. Additionally, transferring property with a quitclaim deed may trigger gift taxes, and selling the home might result in capital gains taxes—both of which could have been avoided with proper estate planning, like setting up a trust. Similar insurance and tax issues may arise with vacation properties. Read more in our article, The Hidden Pitfalls of Co-Owning a Vacation Home
Using a trust instead of a quitclaim deed can protect your property and offer several benefits. A trust allows you to keep control of the property during your lifetime while providing a smooth transfer to your heirs after your death. Unlike a quitclaim deed, a trust helps you avoid probate, protect your property from creditors, and minimize tax liabilities for your loved ones.
For example, placing your home in a trust can result in a “step-up in basis” at your death, which adjusts the property's value to its fair market value. This can significantly reduce or even eliminate capital gains taxes when your heirs sell the property. Keep in mind that a DIY estate plan is also fraught with issues.
Don't let a DIY deed put your home or loved ones at risk. If you're considering transferring property or setting up an estate plan in Tyler, Texas, it’s crucial to seek professional legal advice. A seasoned Tyler real estate lawyer can help ensure that your property transfer is secure and your wishes are honored.
At Campbell Law Firm, we have over 35 years of experience helping clients in Tyler and the surrounding areas with real estate transactions, estate planning, and probate matters. If you're considering transferring property or setting up a trust, we’re here to help you avoid the risks of DIY deeds. Book a consultation today to ensure your property and loved ones are protected.
