Adding someone (non-spouse) to a home title

[AtlRick]

Jurisdiction

South Carolina

My older brother in South Carolina wants to add me to the title of his home so that when he passes, I will become the owner and presumably this would simplify matters compared to only listing me as his sole heir in his Will. He owns the house fully and it is paid off.

He is not sure how to go about this exactly. I live nearby, in Georgia but from what I read of South Carolina law, he would need to get a new title that lists both of us as holding joint tenancy with right of survivorship. Is this accurate? Does this need to be done by an attorney or can a title company do it? Do we need to both go together to an office to sign in person to accomplish this? And any idea of how much this typically costs?

I am currently already listed on him as a direct beneficiary of various accounts, insurance, 401K, and so forth. But it is our understanding that a home cannot be passed by that kind of assignment of a beneficiary.

 

[Tax Counsel]

I live nearby, in Georgia but from what I read of South Carolina law, he would need to get a new title that lists both of us as holding joint tenancy with right of survivorship.

That's how it's done in at least most states when adding someone other than a spouse to the deed.

Does this need to be done by an attorney or can a title company do it?

It should be done by an attorney as drafting the deed for others is the practice of law, which means only a lawyer is permitted to do it. A title company may have a lawyer, however, that can do that for you. You can ask. When it comes to a deed, you want to be sure it's done correctly or you may fail to achieve the goal you want, and after he dies it is too late to fix it.

He should be aware that by doing this is making a gift to you for federal gift tax purposes and may need to file a gift tax return with the IRS. Although if it is done this year he wouldn't owe any tax unless he's already given away millions of dollars in gifts. Nevertheless the return is required he makes gifts to any one person during 2024 that exceeds $18,000 in value.

He should also be aware that there is more than one way to achieve his goal of transferring his home to you should he die before you do that would still avoid probate. It would probably be a good idea for him to discuss an estate plan with an estate planning attorney. Doing that will help him achieve his goals with the least potential downsides and the least in taxes and other costs.

 

[adjusterjack]

Yes, it would take a new deed.

He would be deeding ownership of the property from himself to the two of you.

You don't have to appear together to sign it. He can have it created in South Carolina and express mail it to you for your signature.

As to the cost. DIY with a quitclaim deed costs only the recording fee.

If he wants a lawyer (recommended) or title company to do it he can call around for prices.

 

[zddoodah]

presumably this would simplify matters compared to only listing me as his sole heir in his Will. He owns the house fully and it is paid off.

Maybe. That assume he adds you to the title in a manner that results in title passing to you "automatically" when he dies, which he apparently doesn't know how to do. I assume he's also not aware that there are other methods of avoiding probate that might be better for him and/or you.

Also, since you didn't mention a spouse or children, I'll ask you to confirm that your brother has neither.

from what I read of South Carolina law, he would need to get a new title that lists both of us as holding joint tenancy with right of survivorship.

That's one way to do it.

Does this need to be done by an attorney or can a title company do it?

A "title company" is short for title insurance company. Title companies exist to write policies of title insurance. Sometimes they also provide escrow services. AFAIK, they don't provide document preparation services. Since your brother doesn't know what he's doing, he should hire a lawyer to ensure that what he wants to happen will happen.

Do we need to both go together to an office to sign in person to accomplish this?

If all he does is execute a deed that transfers title from himself to himself and you jointly, you would not need to sign anything. Even if there were something you needed to sign, that could be accomplished by having the document(s) emailed to you with you printing and signing them and returning them by overnight mail.

And any idea of how much this typically costs?

Simple deed preparation and recording shouldn't cost more than a few hundred dollars.

 

[adjusterjack]

I am currently already listed on him as a direct beneficiary of various accounts, insurance, 401K, and so forth. But it is our understanding that a home cannot be passed by that kind of assignment of a beneficiary.

Another option is for your brother to create a Revocable Living Trust with you as successor trustee and beneficiary. The property deeded to the trust. Upon his death you become trustee and can execute as deed from the trust to you, the beneficiary.

 

[AtlRick]

Another option is for your brother to create a Revocable Living Trust with you as successor trustee and beneficiary. The property deeded to the trust. Upon his death you become trustee and can execute as deed from the trust to you, the beneficiary.

Can a Revocable Living Trust (or an Irrevocable one, for that matter) be done without an attorney? There seem to be various organizations and sites (examples: NOLO, LegalZoom) that provide forms and step-by-step processes that purport to allow you to at least make basic Wills and Trusts online for modest amounts, but I don't know how safe it is to go that route.

 

[AtlRick]

Also, since you didn't mention a spouse or children, I'll ask you to confirm that your brother has neither.

He has neither a spouse nor children.

He was married for a few years, about 35 years ago, but then divorced. His former wife passed away years ago. They didn't have any children together. (Although she had a couple of kids prior to their marriage and now they are adults, but hard to imagine that has any bearing on his Estate, since he was long divorced at the time he acquired the current home).

 

[adjusterjack]

Can a Revocable Living Trust (or an Irrevocable one, for that matter) be done without an attorney? There seem to be various organizations and sites (examples: NOLO, LegalZoom) that provide forms and step-by-step processes that purport to allow you to at least make basic Wills and Trusts online for modest amounts, but I don't know how safe it is to go that route.

There's always a risk involved in doing legal stuff without a lawyer.

You have to weigh the potential consequences against how much money you save.

Like the old oil filter commercial.

You might save $1000 by using the DIY forms but your heirs may have to spend tens of thousands on probate if you missed something.

If you decide to DIY you certainly have to thoroughly educate yourself on the legal processes that are involved so that you have a better chance of getting it right.

 

[Tax Counsel]

Can a Revocable Living Trust (or an Irrevocable one, for that matter) be done without an attorney?

A person may draft their own trust instrument, but unless the person knows the state trust laws and the related federal and state tax laws, that person is likely to make mistakes that either will end up not achieving what he/she wants or that ends up costing them, their trust, and/or their beneficiaries a lot more money than had it been done another way. For example, there are significant differences between revocable and irrevocable trusts, including very different tax treatment. Without going into the details, in general an irrevocable trust is not a good choice from a tax perspective, though other priorities of the person creating the trust may mean an irrevocable trust is the best choice overall. Consulting a trust attorney can help avoid the pitfalls of doing it yourself when you aren't an expert in the area.

A person who is not a lawyer cannot draft a trust for someone else. Doing so is the unauthorized practice of law.

 

[AtlRick]

That's how it's done in at least most states when adding someone other than a spouse to the deed.

It should be done by an attorney as drafting the deed for others is the practice of law, which means only a lawyer is permitted to do it. A title company may have a lawyer, however, that can do that for you. You can ask. When it comes to a deed, you want to be sure it's done correctly or you may fail to achieve the goal you want, and after he dies it is too late to fix it.

He should be aware that by doing this is making a gift to you for federal gift tax purposes and may need to file a gift tax return with the IRS. Although if it is done this year he wouldn't owe any tax unless he's already given away millions of dollars in gifts. Nevertheless the return is required he makes gifts to any one person during 2024 that exceeds $18,000 in value.

He should also be aware that there is more than one way to achieve his goal of transferring his home to you should he die before you do that would still avoid probate. It would probably be a good idea for him to discuss an estate plan with an estate planning attorney. Doing that will help him achieve his goals with the least potential downsides and the least in taxes and other costs.

So I learned recently, a bit to my surprise, that my brother hasn't paid the house off. He still has a mortgage, albeit the payoff amount is less than $9,000 so he would likely have it paid off within a year. Nonetheless, I realized this only when he mentioned that the bank still has title and he wants to just keep paying normally on the mortgage until it's paid. But yet he still wants to add me to the title - which presumably now means adding me to the mortgage?

Since he still has a mortgage, can he somehow still add me as a joint owner while still paying off the house? I was under the impression that this isn't so simple and could actually require re-financing the house and "closing" all over again (which clearly wouldn't make any sense with only $9,000 remaining to be paid on the mortgage).

Anyway, in this circumstance, is there any way for him to achieve the goal he has (which is for he and I to share ownership of the property) while he is still paying off the mortgage, or would this have to wait until it is fully paid off?

 

[adjusterjack]

But yet he still wants to add me to the title - which presumably now means adding me to the mortgage?

No, you would have no obligation on the mortgage.

Since he still has a mortgage, can he somehow still add me as a joint owner while still paying off the house

Yes.

I was under the impression that this isn't so simple and could actually require re-financing the house and "closing" all over again (which clearly wouldn't make any sense with only $9,000 remaining to be paid on the mortgage).

No, it doesn't require that.

Federal law prohibits a mortgage company requiring that for intrafamily transfers.

Anyway, in this circumstance, is there any way for him to achieve the goal he has (which is for he and I to share ownership of the property) while he is still paying off the mortgage, or would this have to wait until it is fully paid off?

A deed as previously discussed or a revocable living trust.

Don't be penny wise and dollar foolish. Consult an attorney and get it done right.

 

[Tax Counsel]

Anyway, in this circumstance, is there any way for him to achieve the goal he has (which is for he and I to share ownership of the property) while he is still paying off the mortgage, or would this have to wait until it is fully paid off?

It can be done before the mortgage is paid off. That's the whole point of the part of the federal Garn-St. Germain Depository Institutions Act of 1982 that made it impossible for a mortgage lender to terminate the mortgage early using a due on sale/transfer provision when the transfer is one of the kinds specified in the Act, including transfers to close family members. The part of the Act restricting due on sale/transfers is found in the U.S. Code at: 12 U.S. Code § 1701j–3. Assuming that the loan is current and otherwise compliant with the mortgage, the lender can't take any action just because you get added to the deed. However, the mortgage will still attach to the entire property, so he still will want to pay it all off. For $9,000 left, he shouldn't have much risk of losing the property anyway.

But before adding you to the deed, he should see an estate planning attorney and a tax professional (enrolled agent, tax CPA or tax attorney) to find out all the options he has to determine which one will be most beneficial to achieve his goal at the least cost, particularly keeping the tax burden as low as possible.

 

[Foamback]

Doesn't one lose the step up in capital gains basis when gifted?

 

[zddoodah]

But yet he still wants to add me to the title - which presumably now means adding me to the mortgage?

Your presumption is incorrect. Adding you to the title would not require that you also assume responsibility for the mortgage.

Anyway, in this circumstance, is there any way. . . .

We all told you a month ago that he should consult with a local attorney. I guess y'all are just going to ignore that?

 

[army judge]

I'm no longer puzzled by the throngs of humanity rushing to avoid doing things the correct way.

The easy way is deceiving, because it isn't easy at all.

 

[AtlRick]

Your presumption is incorrect. Adding you to the title would not require that you also assume responsibility for the mortgage.




We all told you a month ago that he should consult with a local attorney. I guess y'all are just going to ignore that?

He's old, slow to take actions, and is in a different area... it requires a certain degree of nudging to get him to go to any appointment, with me or alone. I also didn't want to presume consulting an attorney without him. It's taken awhile to convince him that there are potential complexities and it's best to talk to an expert.

 

[Tax Counsel]

Doesn't one lose the step up in capital gains basis when gifted?

Yes. Assuming that the asset is worth more than the donor's the donee gets the asset with same basis the donor had. This is known as a carry over basis in tax law. If it is likely that the OP's brother will die before the OP does then giving the OP a share of it now would result in higher capital gain later when the OP sells it. If the OPs brother continues to hold the entire property until he dies and then the OP gets the property through intestate succeesion law, a will, or a revocable living trust the OP will have the basis of the home adjusted to fair market value for the whole property. If he holds half of it when his brother dies, only half the property gets that basis step-up.

 

[AtlRick]

Thanks to all for the very helpful information. I am in the process of helping him find an attorney in his area. I'm aware that the attorney will advise on the various considerations, but would the main advantage of a revocable living trust be the aforementioned tax implications? (I had heard at some point that there are also some downsides to putting a house into a trust, but honestly I don't recall the details and we'll leave this to an estate attorney in his state to to explain the pros and cons).

 

[Tax Counsel]

... would the main advantage of a revocable living trust be the aforementioned tax implications?

The main advantage of a revocable living trust is avoiding the time and expense of probate will still providing the tax benefits that the person would get if he/she passed their property by will, intestate succession, or pay on death beneficiary designations/tranfer on death deeds. A non revocable trust created and funded before you die will avoid probate, but it won't allow the property to get a step up in basis on the date of death nor will it help avoid the higher income tax rates that are imposed on trust income.

There are certainly downsides to consider with a trust, but the entent of them vary depending on how you set up and operate the trust. A revocable living trust that is used essentially as a will substitute won't have a whole lot of downside to it, with the notable exception of whatever the trust needs to pay for administration of the trust. That's something to discuss with an attorney, too. There are other ways to transfer the property than by will or trust, too. For example, using a transfer on death deed that is put in place before you die to transfer real estate to your beneficiaries.