Quitclaim deeds transfer ownership of property to someone else. There doesn’t have to be a sale and because of this many people attempt to use them in their estate plan. Using quitclaim deeds this way may not be the best idea though.
How Quitclaim Deeds Work
One individual will give up (quitclaim) their interest to a property and grants it to someone else. There are no guarantees of ownership, that you hold the title, or that the title is free and clear. Essentially, you give up whatever interest you have, but you may not have an interest in the property.
Cost Basis
One of the big issues with using a quitclaim deed for estate planning is that the grantee has to pay capital gains taxes. If a father buys land for $100,000 and then 5 years later it’s worth $200,000 and is given to a son via quitclaim deed, then the son will have to pay capital gains taxes if he decides to sell.
Delayed Filing of Quitclaim Deeds
Some people attempt to wait to file the deed until after the grantor dies. This method becomes an issue because there is no authorization to file the deed. The transfer then becomes invalid because there is no authorization.
Medicaid Planning
Many people attempt to use quitclaim deeds to get properties and assets out of their name for the purpose of Medicaid qualifications. The issue becomes that Medicaid has a five-year look-back policy so unless you made the transfer a long time ago it could still disqualify you from Medicaid benefits
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